According to the Citizens Advice Bureau (CAB), protection insurance is often failing those who need it the most, adding to their debts instead of protecting them.
In a recent report, the charity have said that mortgage and general credit payment protection insurance was often mis-sold to people who could not claim on it, and was designed to exclude many of the common situations that can lead to repayment problems.
The charity found policies sold by several well-known mainstream lenders excluded cover for common problems such as bad backs and mental health that can stop people working. Others had arbitrary age limits and banned the self-employed and those on fixed term contracts from making a claim.
The report stated that baseline cover specifications, such as the one set by the Council of Mortgage Lenders in 1999, was set at a very low standard. They have called on the Financial Services Authority to create a new baseline for the industry, setting out acceptable standards of content for payment protection agreements.
Our view
This is a difficult call. There are many where they are no doubt mis-sold. However, we believe that credit arrangers such as we see on television also serve a valuable role. Many people are sometimes desperate for the money - and they will do anything to get it. If they are a poor credit risk, why shoudn't the lender/credit broker insist on insurance? And yes, then people start to complain after they have got their loan. These scenarios are literally 'six of one and half a dozen of the other'.