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Insurance proposal for unsecured loans welcomed

Insurance proposal for unsecured loans welcomed

Category: Loans

Updated: 14/11/2008
First Published: 14/11/2008

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Recommendations for the sale of payment protection insurance (PPI) - often offered alongside unsecured loans - have been praised.

Consumer campaign group Which? noted that proposals such as a ban on single premium policies as well as preventing providers from offering PPI within 14 days will help borrowers.

"This is a huge victory for consumers who have often felt pressured into buying expensive and inadequate PPI products. The Competition Commission has listened to the consumer voice and has taken decisive action," said chief executive Peter Vicary-Smith.

PPI is offered to insure against the possibility that unsecured loans cannot be paid back due to unemployment or illness.

But single premium policies add the cost on to the loan itself, meaning interest is paid on both for the entire term, Which? noted.

Meanwhile the Association of British Insurers has criticised the recommendations, noting that claims due to unemployment have risen by 69 per cent over the last year.

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