press release

Press Release - 22/02/05

EXTORTIONATE PREMIUMS CHARGED FOR PERSONAL LOAN PROTECTION WARNS MONEYNET

New data reveals that major lenders are slamming consumers with excessive premiums for often unnecessary cover - and unsuspecting borrowers are paying interest on their premiums.

A NUMBER of leading personal loan providers are ripping off borrowers by offering loan protection cover - or payment protection insurance (PPI) - at highly inflated rates up to FIVE times that of cheaper players.

New Moneynet.co.uk research (see table below) shows that some lenders - including prominent names like Diners Club, Britannia Building Society and Norwich & Peterborough Building Society - are guilty of charging excessive premiums for PPI.

A borrower with a £5,000 Diners Club personal loan for example would pay back an additional £38.76 a month if they chose to take out the cover. Cover arranged with Norwich & Peterborough on £5,000 would cost an extra £39.84 a month and £32.56 a month with Britannia Building Society.

"And as many providers will also put the entire cost of the cover onto the overall loan at the outset of the loan agreement, borrowers are actually being charged interest on their insurance," says Moneynet chief executive Richard Brown.

"A further danger is that the insurance cover is non-refundable with many providers - which means that even if a well intentioned borrower wants to clear the loan early, he or she will be out of pocket with the insurance premiums paid up front."

But insurance is available through rival lenders and independent loan cover providers at a fraction of the cost, adds Brown.

"Many borrowers think that this cover has to be taken from the lender. In most cases this is not the case and it pays to shop around for cover. At Moneynet we offer a policy which gives competitive levels of cover at a cost of only £7.50 per £100 of benefit. This is less than 20% of the cost of the most expensive cover, giving substantial savings over the term of the loan".

"Imposing extortionate premiums for personal loan cover is unnecessary. The banks are pulling in around £1bn a year in commission payments from the sale of this insurance*, and it is quite frankly a case of some lenders being greedy," said Brown.

Brown added that borrowers need to be cautious when arranging a loan, as many providers will automatically include PPI cover when giving a quote.

"In some cases the cost of the loan cover can drive up the repayments to absurd levels. As our table below shows, you do not have to pay through the nose for this cover."

And Vincent Cable of the Liberal Democrats has called on the Office of Fair Trading to launch a full scale investigation into payment protection plans.

"The margins charged by many lenders on these plans are huge: we need a thorough investigation into the market in order to help protect consumers," he said.

£5000 loan over 5 years:


Some Of The Worst
	£5000 loan over 5 years	Cost of loan p/m
Diners Club*	£104.18 without PPI
	£142.94 with PPI	(£38.76)

Britannia	£97.95 without PPI
	£130.51 with PPI	(£32.56)

Norwich & P'borough	£104.31 without
	£144.15 with	(£39.84)

Bank of Scotland	£108.18 without
	£145.34 with	(£37.16)

PRESS ENQUIRIES

Richard Brown, Chief Executive, 0208 313 9030

David Andrews/Cathy Tully, David Andrews Media Ltd 07941 255855 / 01273 774109 / 07747196854

Consumer enquiries: info@moneynet.co.uk / www.moneynet.co.uk

Moneynet.co.uk is the UK's longest established online personal finance research and data analyst company. The company offers consumers a choice of thousands of low cost financial services products. From mortgages, personal loans to motor, home and medical insurance, credit cards, savings accounts and best buy fixed rate products, Moneynet is one of the most comprehensive online services of its kind in the UK. Founded by chief executive Richard Brown, the Moneynet brand is destined to become one of the UK's major players in consumer finance products.

A DAVID ANDREWS MEDIA LTD - RELEASE FEBRUARY 2005