The Financial Services Authority (FSA) and Office of Fair Trading is unhappy about the way PPI products are sold. Which?, the consumer rights champion, has investigated supermarket financial products and says some are “a swizz”.
The criticism comes as automotive finance lenders mount a campaign to halt the slump in point-of-sale finance.
Financial advertising is causing concern among MPs, and some want it to be subjected to the same scrutiny as general advertising is through the Advertising Standards Authority. Emma Bandey, personal finance campaigner at Which?, says: “The FSA needs to become a more aggressive enforcer.
“We want a robust system of deterrents so the interests of consumers are protected.” Which? dubs PPI “poor protection insurance”.
Pula Houghton, Which? principal policy adviser, says: “Pound for pound, PPI tends to be a poor value product. The chances you will have to claim on the policy are small and, if you have to, the chance of success is even smaller.”
Only 20% of claims on PPIs are paid, according to Which?, which contrasts it with 82% for car insurance.
Which?, quoting OFT research, says PPI is added automatically to the cost of a loan in 87% of cases.
“This increases the cost dramatically and leads some consumers into thinking that they can’t take the loan without PPI,” it says.
“It is often sold aggressively to people who don’t need it. We advise consumers to look at other forms of protection insurance.”
Which? claims that supermarket financial products are at best average and at worst “distinctly bad value”. The organization investigated loans, insurance products, credit cards and savings.
Neil Fowler, editor, Which? magazine, says: “Just because supermarkets offer good value on groceries, people should not assume this applies across the board. Consumers can pay well over the odds for their financial products.”
Borrowing £5,000 from Marks & Spencer is “downright expensive”, says Fowler, and costs £348 more over three years than from the cheapest provider.