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OFT spurred into action

The Office of Fair Trading (OFT) will investigate sales of payment protection insurance (PPI) after pressure from the Citizens Advice Bureau.

The independent advisory group complained the size of the sector, the complexity of the product and the way it is sold are seriously harming the interest of consumers.

In preparing to probe the sector, the OFT outlined a number of issues that suggest it is not working well for consumers, including difficulties for gaining information about alternative suppliers, the wide degree of pricing and the fact gross profit margins on the business appear high.

John Vickers, chairman the OFT, said: "Payment protection insurance is a complex product, often bought almost as an afterthought. Borrowers may shop around for credit, but the complex nature of payment protection insurance and a lack of choice mean that they are less likely to shop around for it. There is a high potential for consumer detriment and our study will look at whether people are getting a good deal or not."

The scope of the study will be announced after the Competition Commission (CC) has reported its findings on store cards and associated PPL The result from the CC investigation as well as the Financial Services Authority's thematic work on PPI will influence the direction of OFTs study.

Meanwhile, insurance broker Paymentcare has stepped up the PPI debate.

A mystery shopping exercise by the firm showed high-street banks are still not making clear to consumers they do not have to take out PPI when applying for personal loans.

Source: Investment Week (Main)