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Tesco payment protection

Tesco was one the first major retailers to branch out and start offering loans and credit cards to its customers. As the country’s leading supermarket it now provides an array of financial products and insurances. Just one of these products is Tesco payment protection insurance.

Payment protection insurance is controversial. For many years it was widely sold, but it has come under scrutiny in recent years after it emerged the cover had been widely mis-sold across the financial world. The cover is also accused of being expensive and offering poor value for money to customers.

On loans, Tesco payment protection and similar cover provided by other lenders is usually applied as a percentage of the overall borrowing. Typically this is between 13%-25%. On a loan of £10,000, therefore, you may expect to pay between £1,300 and £2,500 for the insurance. The cover will also normally attract interest at the same rate as the base loan. This can mean the customer’s debt is significantly increased and it may take them much longer to repay the loan.

On credit card PPI, such as Tesco payment protection, is usually applied on a monthly basis. The average credit card PPI policy costs approximately 79p per £100 outstanding on the balance. On a credit card balance of £10,000, therefore, the customer may pay around £79.00 per month for the cover.

The question of the value provided by these policies is raised when the level of policy payouts is looked at. A 2008 survey by The Competition Commission found that only 15% of customers who tried to use their loan PPI policy received a payout and just 11% of those attempting to use a credit card PPI policy. This suggests that many customers may be paying for expensive cover that they may never be able to use and certainly calls into question the value for money such insurance may offer.

Another significant issue with payment protection insurance is that it has been widely mis-sold. The issue of mis-selling was first exposed by investigations by The Financial Services Authority and The Office of Fair Trading (OFT) in 2006 and, as a result, there has been an enormous increase in the number of unhappy customers making claims for mis-selling. In the same year the OFT also investigated back charges applied to credit cards for late payments and over the limit fees. Their investigation revealed that many fees applied routinely by credit card companies and banks were unfair.

It was revealed that some lenders applied charges of up to £35 for late payments and over the limit fees with many customers having fees applied to their accounts multiple times. Lenders defended these fees by saying they were necessary to cover costs incurred, but the OFT found that £12 was a reasonable maximum charge. As a consequence, most lenders have now lowered their charges. If you paid excessive and unfair charges in the past, though, you may be entitled to make a complaint. Since the OFT’s finding were released thousands of unhappy customers have begun claiming back bank charges they regard as unfair.

If you think you have been mis-sold a Tesco payment protection policy or you would like to claim back unfair credit card charges, call our team on 0207 471 2000.


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