Investigation reveals loan cost woes

CONSUMERS across Suffolk are being left hundreds of thousands of pounds out of pocket every year by a costly insurance policy they might not even need, shock research has revealed.

By Danielle Nuttall

CONSUMERS across Suffolk are being left hundreds of thousands of pounds out of pocket every year by a costly insurance policy they might not even need, shock research has revealed.

An undercover investigation launched by Suffolk Trading Standards - believed to be the first of its kind in the UK - has exposed "appalling" sales techniques among many high street banks selling personal loans.

The research was carried out after figures showed the number of complaints about consumer credit in Suffolk had soared by 100% in five years - with almost four now made every week.

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An overwhelming number of the complaints involved Payment Protection Insurance (PPI), which is sold alongside personal loans or finance deals to protect repayments if a customer loses their job.

Suffolk Trading Standards say many banks are automatically attaching the insurance to personal loans without making it clear to the customer they have a choice whether to buy it or not.

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One of its complaints saw a Suffolk consumer faced with a £10,000 bill on top of a personal loan for insurance he had no idea he had taken out.

In many cases the insurance nets the bank even more than the interest payments on the loan itself, leaving customers with a bill of several thousand pounds for a product they might not even require.

Trading Standards officers carried out uncover investigations on eight high street banks in Ipswich and were "shocked" at the results.

Matthew West, Trading Standards' lead officer for consumer credit, said: "Every single bank without exception did not represent the true cost or financial commitment to the insurance.

"I was shocked to see there was such widespread problems and so many issues. People are being told it's compulsory when it's not.

"They are being told it's cheap, when it's not. They could have saved money and got the insurance somewhere else.

"Every single bank we went to automatically included the insurance in the quote. For example, if you said you wanted a £2,000 loan over five years they would give you a quote of 'X' amount per month.

"That quote would include insurance but they will not necessarily tell you. Only when you ask what happens if you lose your job do they make you aware of it."

Mr West added: "It's costing consumers hundreds of thousands of pounds. We are not saying do not take this out.

"Make sure you know what you're buying, do you need it? Are there any other options?

"The policies are expensive and it might be people have other policies that already cover it such as life insurance policies with critical illness cover or unemployment or something like Income Protection Insurance. We are really asking for more transparency from the banks."

The investigation was carried out in March and involved sending 'test' consumers, with little knowledge about PPI, into the chosen banks to ask advice about taking out a loan. Each interview was recorded.

"When we went back to the office and listened to the tapes, a lot of what we were told contradicted the written documents," said Mr West.

"Some of the problems are the banks will not give written information unless you go through with an application.

"Somebody that's very conscious of the facts, and wants to make an informed decision, would struggle to get information on the products to be able to sit down and see what's best for them.

Mr West added he had also received complaints from consumers who had taken out PPI and upon losing their job had been told they were still not covered because they were self-employed or for other reasons.

Brian Capon, head of media relations for the British Bankers' Association, said from the end of this month, PPI agreements would become much clearer for the consumer.

He said: "From May 31, all consumer credit agreements that relate to PPI and that protection insurance will require another form to be signed - one for the loan and one for the PPI.

"It will be absolutely clear that what you're taking out is two completely different things. Two separate signatures and two separate forms.

"At that point as well, the consumer will say how they want to pay for that insurance. They can have it added on the cost of the loan, only if they choose to do so. You can fund that insurance in other ways. Everything will be a lot clearer for the consumer."

Reg Ruffles, assistant county trading standards officer, said: "Insurance is a complex issue which concerns almost every Suffolk resident.

"Following a number of complaints about PPI we felt it essential to determine the extent of the problem so that we could highlight it.

"Consumers should feel able to challenge what they are offered and ask questions to get the information they need to make informed decisions."

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