COMMENT
PPI - Officially A Mis-Selling Scandal

I say, I say, I say - what's the biggest insurance racket there is? In my view, it's a toss-up between Extended Warranties and Payment Protection Insurance although, if pushed, I'd probably opt for the latter.

Payment Protection Insurance (PPI) is usually sold alongside credit agreements such as loans and credit cards and it's designed to cover the monthly repayments if you lose your job or can't work because of accident or ill-health. It'll also pay off the debt if you drop dead.

The problem with PPI is that a) it's wildly expensive, b) the terms and conditions often preclude people from making a claim and c) it's frequently mis-sold to people who wouldn't be able to claim on it anyway. Unfortunately, staff selling loans are usually paid commission so they've got a very strong incentive indeed to persuade you to buy this insurance whether you need it or not.

We've been saying this for years, as have various consumer organisations, and now the city watchdog, the Financial Services Authority, has confirmed that it too is unhappy with the way these policies are being sold.

For the last few months they've been conducting a mystery shopping exercise and they've uncovered poor selling practices and a lack of proper compliance controls among half the firms they investigated. Some cases are so serious they're going to investigate further with a view to possible enforcement action.

The consumer help organisation, Citizens Advice, has already made a formal complaint to the Office of Fair Trading about PPI and has asked it to investigate the market. The OFT has until December to make up its mind whether to do so. Hopefully the FSA's report will help them to decide.

In the meantime, Citizens Advice suggest that if you've got payment protection insurance you should check your policy carefully to see if you'd be able to make a claim if anything went wrong. In particular pay attention to any age and health conditions in the terms of the policy. If you think you may have been mis-sold a policy you should complain to the firm concerned and ask for a full refund.