The Mis-Selling of Payment Protection Insurance

According to watchdog, in the last two years complaints about personal protection insurance sold with loans, credit cards and mortgages have increased tenfold.500 complaints a week are received by The Financial Ombudsman about the insurance, which works out at around 25 percent of those who have it.Watchdog has written to the Financial Services Authority (FSA) asking it to bring the banking and finance industry into line.Borrowers are been overcharged by a staggering 1.4 billion pounds a year through these protection insurances, according to an official study.Millions of people have been mis-informed about PPI's and have been conned into buying them. They have been lied to by salesmen, some have even told customers that unless they buy the insurance they will not qualify for the loan, card etc. that they want.There are more than 14 million PPI polices in existence alongside loans, mortgages, credit cards, store cards and car finance.PPI is supposed to help if the borrower suffers a sudden loss of income through unemployment or sickness.There are many examples though of where PPI has been sold to people who do not even qualify for cover, such as the sick, pensioners and the self employed.What is unusual about the complaints to the ombudsman is that they are about the way they have been sold, rather than people not being able to claim. The biggest complaint being that people did not realise that they were taking out PPI and the cost of the policy was not explained to them.PPI can add thousands to the cost of the loan.In the majority of cases borrowers are charged a one off premium which is added to the cost of the loan and attracts huge amounts of interest.Some companies have increased premiums resulting in policies that are often more expensive than deals available from a specialist company.The commission may possibly put a cap on PPI charges and stop the banks selling the policies alongside other products.Consumer group Which? condemned the PPI sold with credit cards as worthless. It said few people are able to make successful claims.Personal finance campaigner at Which? , Doug Taylor, said: 'Credit card PPI is a modern day snake oil - it's a useless product, expensive and poorly designed.'As the credit crunch continues to take hold, people want to be protected and have peace of mind, but credit card PPI, like a house of cards, won't give you the support you need.'A number of well known firms have been fined by the FSA for mis-selling PPI.The HFC Bank, was fined 1.085 million pounds, Capital One bank, was fined 175,000 pounds, and GE Capital Bank, was fined 610,000 pounds.The FSA said: "The FSA is reviewing the position in the light of the information it has received from the ombudsman service, and the information provided by its own ongoing thematic work on PPI.'It will make a decision on possible measures to take on the basis of this review in due course.'

Regular Credit Checks And Identity Theft Insurance

Credit experts suggest that everyone should get a credit check at least once a year to ensure that information in your current report is accurate and to see what lenders see in making their decision about your credit worthiness. A credit check gives you key statistics on your complete borrowing history including your credit lines, missed payments, debts and outstanding loans. Your credit characteristics are consolidated into a score, which is used by lenders to determine your credit worthiness and interest rates. What’s in your credit report?Your credit report contains all of your credit accounts including the length of credit history, breakdown of debt type (mortgage, student loan, credit card), credit lines, account balances, and whether you’ve paid each loan as agreed.What is your credit score?Your credit score is a number that incorporates all information on your credit report and reflects your credit risk level to lenders. For the two most common scores, FICO and VantageScore, lower scores indicate a higher credit risk. FICO recently made changes to the way it calculates scores, called FICO version 2, with one notable change being that a single delinquency wouldn’t have as drastic of a negative impact on your score. VantageScore is a new scoring method that is shared across all three major credit bureaus.How lenders use your credit scoreLenders use your credit score, sometimes along with other factors including your income and value of your assets, to determine your credit worthiness. The base level assumption is your previous behavior is predictive of your future behavior in terms of maintaining and paying off debt on time. Thus the credit score will be one of the key factors that determine whether lenders will give you a loan, and at what interest rate. Lenders will charge high-risk consumers a higher interest rate to compensate them for taking on extra risk. Using your credit report to find errors and identity theftUnfortunately, sometimes credit reports contain errors. Errors can be costly if they impact your credit score! If a lender charges a 7% interest rate instead of 6% because of an error in your report, it will cost you over $70,000 extra over the life of a $300,000 30 year loan. Credit reports can also quickly highlight identity theft or fraud—for example if you notice accounts in your name that you didn’t open.Credit Reporting ServicesThere are a number of credit services to help you proactively manage your credit profile. You can get a free credit report once a year or if you apply for and are declined for credit. Typically, free reports don’t include your actual credit score—just your full report. High-level, there are two types of credit reporting services: the first monitors your credit profiles and proactively identifies you if there is any type of negative change. This can help you prevent identity theft and monitor how lenders see your profile. These services will often include identity theft insurance to help you get back on your feet if you are a victim of identity theft. The second type of service also gives you your FICO score or VantageScore and monitors it each month. This service can alert you if your score drops and tell you what impact it might have in lenders’ eyes.