As banks and building societies tighten up their lending criteria, consumers are at risk of a double whammy, warns PPI lobbyist Sara-Ann Burgess from Burgesses: "People are turning elsewhere for credit which means they are likely to pay more in interest over the lifetime of their loan and fork out excessive premiums for any accompanying Payment Protection Insurance, which in some cases will be totally unsuitable for their circumstances."
In the motor industry, sales of new and used cars are down, but the number of consumers turning to their local showrooms for finance is up - a clear indicator that High Street banks and building societies are no longer the main source of credit for a dealership car.
Two months ago five motor retailers were fined £175,000 by the Financial Services Authority for exposing 2,175 customers to the risk of being sold unsuitable PPI policies and as dealerships continue to increase their quota of finance agreements, more people could become victims of PPI mis-selling.
Sara-Ann Burgess comments: "These retailers seriously breached FSA guidelines. They did not gather information about their customers, re their suitability to purchase PPI or whether they were eligible to claim, failed to ensure proper sales processes were followed, and neglected to assess complaints. When finances are stretched, the last thing consumers want is to pay over the odds for cover they don't need or will be unable to make a claim on. People sourcing finance from a dealership should purchase PPI to protect their monthly loan payments. If they are unable to work due to accident, sickness or unemployment, this cover will meet their financial commitments. However, purchasing PPI is not part of the condition of the loan, if the dealer says it is, the company is breaching FSA guidelines. PPI can and should be sourced independently, via a specialist provider where in many cases it's around 10 times cheaper. Given the increasing number of job losses being announced, I encourage consumers to shop around and take the unemployment option in their Loan PPI."
Income protection insurance: News update: October 2008