All About Loans Weblog

The Financial Services Authority have announced that lenders have agreed to stop automatically adding controversial payment protection insurance to quotes for loans when borrowers apply online.  This means that loan and credit card companies will no longer be able to bump up the cost of otherwise cheap loans by automatically adding the coverage of a payment protection insurance to online quotes.

Many lenders’ websites often include the payment protection insurance by using pre-ticked boxes that applicants need to un-tick if they do not want the insurance – something easily overlooked by applicants.  The Financial Services Authority has stated that this type of practice leads to many borrowers ending up purchasing payment protection insurance on personal loans and other forms of credit without making an active decision to do so.

Payment protection insurance covers repayments for a period if the borrower is unable to pay due to an accident, sickness or unemployment. Many lenders would often require this insurance to be taken on for large loans, however payment protection insurance as a product has been criticised for being overpriced and often sold to customers who would not be able to benefit from any claims.

Many firms have now agreed to change their online quote system to allow the customer to actively choose to purchase the payment protection insurance.  By allowing the customer to make an active decision they will then be able to know whether or not it is the right choice for them as well as being able to know if it applies to them.  The change that has been announced by the Financial Services Authority means that borrowers can now actively choose to buy payment protection insurances instead of it being automatically sold – or mis-sold - to them.