| Credit Card covers ‘rip-off’ customers and gather reserves |
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The Consumers’ Association is fuming over a report that revealed the huge profits banks were making through the sale of protection covers to insure loan and credit card repayments. Consumer groups alleged that insurance covers by banks and credit card companies were hardly of any use to the customer, as quite a lot of claims were rejected by these providers and were only being used as a means to earn some money.
The report by Credit Suisse First Boston disclosed that payment protection insurance or PPI was bought from banks by about 25% of their credit card customers and around 50% of loan customers. It also saw Lloyds TSB making at least 14% of its total profits via such policy sales. In fact, the report also disclosed that Barclays, Egg and Alliance & Leicester were stacking loads of money through commissions received from PPI sales, with Barclays earning 10% and Egg 180% of profits from the sale of such covers.
However, Lloyds TSB, Barclays, Egg and A&L dismissed the report’s claims saying that the amount of profit from their insurance deals had not been published. Interestingly, they chose to be tight-lipped about the CSFB report’s other implications like the quality and efficacy of the cover provided and simply said that they had introduced new products recently and were not only looking solely at PPIs for profits.
The Department of Trade and Industry stated that hardly 4% customers were found to have claimed cover and one fourth of even that number had to face rejection by the insurance providers. What’s more, CSFB revealed that most customers had bought the policies without being told that it was not a compulsory, but an optional feature.
However, investors now have to be cautious of a raid that could be carried out by the Office of Fair Trading to review the prices charged for payment protection covers by policy providers.
Posted
on : Mon, 04 Apr 2005 00:00 GMT | Credit Cards News
By : Rob Davis
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