PPI complaints 'could run into tens of thousands'

Payment protection insurance mis-selling complaints are set to rival the endowment mis-selling issue with numbers of complaints running into the tens of thousands, a leading financial company claims.

Defaqto, one of the UK's most prominent financial research companies, argues that the recently announced regulatory clampdown on PPI could be bad news for consumers as banks and other lenders increase rates and charges on loans, credit cards and other products to compensate for the loss of income from protection insurance.

Compulsory bank charges could even be imposed for some customers.

In its report on the PPI market Defaqto reveals that too many customers are either unaware that they can shop around for PPI, or do not know where to go for alternative quotes.

The report predicts that it "is quite possible that the annual rate of complaints will run into the high thousands and possibly even tens of thousands" although the number of complaints is unlikely to top complaint received over endowments.

"Consumers are becoming more aware of the all the problems starting to surface in the PPI market," says Brian Brown, the report author and Defaqto's Head of Insurance.

"Too many customers do not realise that they have the right to shop around for payment protection insurance. Therefore the industry must widen public understanding of PPI through greater transparency if the market is to be seen to be operating competitively and in the best interest of consumers."

Mr Brown went on to make the point that insurers and lenders should consider opening up their PPI policies to the customers of rivals. "For instance, there's no reason why a customer buying a loan from one bank could not buy their associated PPI policy through a different bank," he said.

The consequence of complaints about payment protection insurance is that more consumers will face increased costs as income and profits to both lenders and insurers generated from PPI products declines significantly in the coming years.

It is predicted that this will increase the price of unsecured loans, credit card rates and charges and could ultimately lead to the introduction of compulsory bank charges.