Consumers are at risk of being “tricked” into buying payment protection insurance (PPI) they may not need when they take out a loan, according to consumer organisation ‘Which?’

PPI is intended to help people repay their loans if they become ill or lose their jobs, but many in the financial services industry say that it is expensive and liable to be mis-sold.

The Competition Commission is undertaking a survey of PPI – which is worth £5bn a year – to ensure that it is sold appropriately after a referral from the Office of Fair Trading (OFT).

The OFT has identified a number of failings in the way the product is sold, particularly the fact that many lenders price PPI into the cost of a loan without saying that customers could shop around for better cover.

However, even this is problematic, as PPI is a complex product and straightforward comparisons are sometimes difficult to make.

It was also implied by many salespeople that taking out the PPI would help people in their application for credit.

“PPI is not always a suitable product for everyone but we are paid good commission for selling it,” said a tele-salesperson for a major High Street lender.

“The most effective way is to make out that it is part of the loan and people will then take it without question. It’s probably an area that needs looking at by official bodies.”