Banks are using “misleading” sales practices to get customers to sign up to expensive and sometimes inappropriate payment protection insurance on loans, revealed research by Stoke Insurance.
It said sales of protection policies were running at 1,000 deals every hour, with lenders collecting approximately £3bn a year in premiums.
According to a report, Lloyds TSB, Barclays, Royal Bank of Scotland and Natwest all charge up to £1,000 for payment protection insurance on a £5,000 three-year loan. It said the Consumers’ Association had branded the fees excessive.
Stoke Insurance said nine out of ten of the UK’s leading lenders automatically included insurance cover in a loan quote when contacted by mystery shoppers. None checked if the customer was self-employed, which often invalidates cover.
Stoke said eagerness to close the deal also led to banks failing to check an applicant’s medical history.
According to the report, new credit laws designed to crack down on extortionate credit, could result in a flood of claims against bank’s mis-selling policies in this way. It said a new “fairness test” would make it easier for borrowers to take banks to court over “excessive fees and charges”.
