Released on = January 28, 2006, 8:01 am

Press Release Author = First Mortgage Trust

Industry = Small Business

Press Release Summary = Expensive PPI has been labelled nothing less than a
protection racket. More often than not sold to consumers even though they don\'t need
it or could find a cheaper deal by shopping round. Why the the high pressure sales
and whats the alternative?

Press Release Body = The OFT has announced an investigation into PPI (Payment
Protection Insurance) mainly involved with the transparency of the products and the
pricing. The complex nature of PPI and a lack of choice mean that consumers are less
likely to shop around. It also said lenders were adopting high-pressure sales
techniques to persuade customers to take out PPI. Barclays Bank has begun making
cash refunds just as the regulators are moving in. Barclays' surprise refunds follow
an internal review of its PPI book

The Financial Services Authority has also warned that, in a series of supervisory
visits, one in three companies assessed was failing to comply with rules designed to
stamp out mis-selling brought in at the beginning of this year. A recent secret
investigation by the FSA raised significant concerns. In many cases PPI being
automatically included in the loan quote without customers being told cover was
optional.

The OFT could ultimately take enforcement action against firms offering PPI if it
finds they have breached consumer law, or refer the industry to the Competition
Commission.

PPI has become a major money earner for UK financial institutions with the total
market estimated to be worth £5.4bn annually with @ 20m policies in force in the UK,
according to Datamonitor. Claims ratios on PPI are estimated at between 15 and 20
per cent, compared to 55 per cent for household insurance and 74 per cent for motor
insurance. A recent report by investment bank Morgan Stanley suggested income from
PPI is effectively propping up the Internet bank Egg. PPI profits were equal to 20%
of its pre-tax profits last year.

They also accounted for 17% of pre-tax profits at Lloyds TSB, 12% at Alliance &
Leicester, 11% at Halifax/Bank of Scotland, 7% at Barclays, 4% at HSBC and Northern
Rock and 3% at RBS NatWest. With @ 60% of the lump sum premium being earned as
commission the hard sell becomes clear.

THE REMEDY
If you are taking out a loan there is nothing to stop the consumer taking out a
straightforward monthly premium policy pro rata. Paymentshield offer numerous types
of competitive policies and are recognised as an industry leader in protection
insurance. Their Freestart PPI gives 6 months free cover and 25% additional cover
for the life of the policy with back to day one policies.

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