of the lender selling PPI through stealth. The customer's circumstances and her ability to pay the loan and PPI premiums were not considered - I suspect the lady was unaware that PPI was added onto the cost of the loan. This ruthless manoeuvre has now been outlawed by the Competition Commission and the Financial Services Authority.
Braintree, Essex (PRWEB) March 2, 2009
The saying 'it's grim up north' could be applied to the whole country if the debt survey findings from the Citizens Advice Bureau are anything to go by. CAB recently revealed a depressing snapshot of people's finances in these recession-hit times and according to Payment Protection Insurance lobbyist Sara-Ann Burgess underlines the importance of having a policy that pays monthly debts should circumstances change.
Debt enquiries to Bureaux across the UK have doubled in the past 10 years and advisers are currently dealing with 7,241 new debt problems every working day. It is the number one issue, accounting for one in three of all calls. The average personal debt has crept up from £10,700 in 2001 to £16,971 in 2008 and CAB predicts it would take 93 years to pay off this sum if payments were staggered at a rate people could afford.
Feedback from more than 1400 people who contacted 52 Bureaux in July last year reveal over half were in arrears with mortgages, rent, council tax and fuel. The main reasons for indebtedness were; low income, over-commitment, illness or disability and job loss. "This is why," suggests Sara-Ann "PPI has such a crucial role in helping people manage their finances at a time they need it most.
"Claimants receive a pre-agreed monthly sum to pay their bills if they're sick, have an accident, have to leave work to care for a family member or are made redundant for up to a year. It never ceases to amaze me the bad press PPI gets when for many it delivers a financial lifeline."
The 'bad press' as Sara-Ann puts it are a result of the irresponsible actions of High Street lenders who have not only allowed people to borrow beyond their means but continued to fleece customers by selling wholly-unsuitable and over-priced PPI policies. As a result, consumers have turned their back on a product that when properly sold, provides cash sums that far exceed the premium outlay and will help keep the bailiffs at bay and avoid repossession.
Sara-Ann is urging consumers to source cover from independent providers who do not behave irresponsibly and have customers' best interests at heart, rather than their profit margins. She continues: "Independents do not have hidden agendas as staff are not under pressure to sell cover alongside the credit provision. It's widely recognised that standalone firms offer premiums that are 10 times cheaper for loan protection, four times for mortgage and five times for income."
One CAB client, a retired lady, was given a £16,000 bank loan which with interest and PPI premiums, totalled £25,660. The repayments alone were more than her pension and this was before other debts were taken into account.
"This is a classic case," says Sara-Ann, "of the lender selling PPI through stealth. The customer's circumstances and her ability to pay the loan and PPI premiums were not considered - I suspect the lady was unaware that PPI was added onto the cost of the loan. This ruthless manoeuvre has now been outlawed by the Competition Commission and the Financial Services Authority."
Payment Protection policies are not only available for people with mortgages, credit cards and loans - they can also be purchased by those renting and in social housing agreements. Given more than two thirds of CAB respondents were renting their homes either privately or via local authorities and housing associations, Sara-Ann believes millions are missing out on support mechanisms to pay bills because they don't realise PPI is available to them.
She comments: "Not everyone appreciates providers have broadened their cover criteria to ensure rental payments are protected if redundancy, accident or sickness occurs and the usual monthly salary is lost. Independent players such as British Insurance launched such a policy last year - a move that was applauded by housing groups and landlord associations.
"Equally, people are unaware that if they have to leave their job to care for a family member, their bills would be paid if they had a British Insurance PPI policy. I believe this cover would reduce the level of debt incurred by some CAB respondents and it's heartbreaking to hear accounts where people have given up work temporarily to become carers and suffered financially as a result."
PPI premiums are calculated per £100 of benefit. British Insurance, charges £3.40 per £100 for unemployment cover, £3.90 for accident, sickness and unemployment and £1.90 for accident and sickness. A person looking for a monthly replacement income of £500 would pay £17 a month.
Sara-Ann concludes: "Whilst I appreciate that PPI cannot solve all the debt problems, it could stop many households bills from building up and will give people breathing space during stressful times. Put simply, it could ensure life isn't quite so grim."