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Which? looks into the insurance of loan repayments.

According to a recent study by Which?, consumers taking out a loan may well be encouraged into buying Personal Protection Insurance (PPI) as well.

PPI is intended to provide help if people cannot keep up repayments on a loan, mortgage or credit card, if they become unemployed or cannot work due to ill health. However, it is expensive and can often be inappropriate or unnecessary.

Acting as mystery shoppers, staff at Which? requested quotes from 41 different loan companies. The cost of PPI was included automatically in 24 of the replies. Although this practice is not against any consumer law, Which? are concerned that it could be confusing for customers who may not realise that PPI is an optional extra.

The Office of Fair Trading (OFT) has previously spent a year looking in to the £5bn PPI industry. The OFT concluded that, as PPI is complicated, it is difficult to compare policies and many consumers do not shop around for the most appropriate and best value offer. Also, in some cases, customers believed that accepting the PPI cover would mean that the company looked more favourably on their application for credit. Following this study, the OFT referred the industry to the Competition Commission, who are currently carrying out an investigation.