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500 complaints a week are received by The Financial Ombudsman about the insurance, which works out at around 25 percent of those who have it.
Watchdog has written to the Financial Services Authority (FSA) asking it to bring the banking and finance industry into line.
Borrowers are been overcharged by a staggering 1.4 billion pounds a year through these protection insurances, according to an official study.
Millions of people have been mis-informed about PPI's and have been conned into buying them. They have been lied to by salesmen, some have even told customers that unless they buy the insurance they will not qualify for the loan, card etc. that they want.
There are more than 14 million PPI polices in existence alongside loans, mortgages, credit cards, store cards and car finance.PPI is supposed to help if the borrower suffers a sudden loss of income through unemployment or sickness.
There are many examples though of where PPI has been sold to people who do not even qualify for cover, such as the sick, pensioners and the self employed.
What is unusual about the complaints to the ombudsman is that they are about the way they have been sold, rather than people not being able to claim. The biggest complaint being that people did not realise that they were taking out PPI and the cost of the policy was not explained to them.PPI can add thousands to the cost of the loan.
In the majority of cases borrowers are charged a one off premium which is added to the cost of the loan and attracts huge amounts of interest.
Some companies have increased premiums resulting in policies that are often more expensive than deals available from a specialist company.
The commission may possibly put a cap on PPI charges and stop the banks selling the policies alongside other products.
Consumer group Which? condemned the PPI sold with credit cards as worthless. It said few people are able to make successful claims.
Personal finance campaigner at Which? , Doug Taylor, said: 'Credit card PPI is a modern day snake oil - it's a useless product, expensive and poorly designed.
'As the credit crunch continues to take hold, people want to be protected and have peace of mind, but credit card PPI, like a house of cards, won't give you the support you need.'
A number of well known firms have been fined by the FSA for mis-selling PPI.
The HFC Bank, was fined 1.085 million pounds, Capital One bank, was fined 175,000 pounds, and GE Capital Bank, was fined 610,000 pounds.
The FSA said: "The FSA is reviewing the position in the light of the information it has received from the ombudsman service, and the information provided by its own ongoing thematic work on PPI.
'It will make a decision on possible measures to take on the basis of this review in due course.'
According to The British Bankers Association (BBA) PPI is becoming an increasingly important safety net for borrowers and restricting the way it is sold 'could leave customers exposed, just as economic conditions are worsening'.
There are numerous reasons why you might be able to benefit from taking out one of the payment protection insurance policies. Imagine for a moment that you have a large mortgage to pay or pay out a lot each month in loans. How would your manage if you suddenly became ill, suffered an accident or lost your job to redundancy?
The suite of protection policies against all of these occurrences would supply you with the much needed money for you to be able to continue meeting the demands of your outgoings. Your circumstances would all depend on the type of policy that would be most suitable?
If you have a mortgage then mortgage payment protection insurance would ensure that you have the money needed to be able to pay your repayment each month. A policy can make all the difference between you losing your home if you were to fall behind into arrears and keeping it. Lenders will take you to court to seek repossession of your home if you cannot make an agreement to repay the arrears while continuing on with the mortgage. With a policy to fall back on you would not have the worry and would be able to continue meeting the demands of the repayments without any problem.
If your main concern is loan repayments or credit card repayments then loan payment protection insurance could help you to avoid court action. Lenders can take you to court and this could mean you would gain a County Court Judgment against you. At the very it would affect your credit rating and this would mean you could struggle to get credit again in the future.
Income payment protection means you can insure up to so much of your income each month and then use this to continue meeting all of your outgoings. You would be able to pay mortgage outgoings, loan repayments and keep up with all other essential outgoings such as utility and food bills that help to keep your head above water.
All payment protection insurance policies work by paying a premium each month. If you choose to take your policy with a standalone payment protection specialist then the premiums will work out cheaper than tagging on the protection at the time of borrowing. Some providers will payout on their policies from the 30th day of becoming unemployed or of being incapacitated and other could ask you wait as much as the 90th day before claiming. All protection would payout for a certain length of time and the stop. Usually you can take out cover that supply between 12 and 24 months tax-free income. Policies are more viable ways of protecting your outgoings than relying on any savings you may have or the State to provide you with an income. State benefits often let people down and even if they are eligible to claim, only pay towards the interest part of the mortgage. You also might not receive enough to continue meeting loan repayments and all other essential outgoings on the little that the State provides.