The supposed clampdown on the selling of payment protection insurance (PPI) is having little effect so far, with frequent mis-selling and a low rate of successful claims, according to Citizens Advice Scotland.

The Office of Fair Trading in February referred the selling of PPI to the Competition Commission, while the Financial Services Authority has been probing the market since last year and in January levied a hefty fine on major provider Capital One Bank.

Earlier this month consumer group Which? reported that consumers are being tricked into buying expensive PPI when taking out a personal loan over the phone or internet, as a result of some providers adding PPI as a matter of course during the sales process.

Now Citizens Advice Scotland says some of its clients are being "pressurised into taking out PPI through aggressive sales techniques", according to its chief executive Kaliani Lyle. "Others say they were given the impression it was compulsory to take out some sort of insurance policy. Some clients even later found they were paying for policies they had actually refused.

"Our client case-evidence also shows that PPI is often sold to clients who cannot possibly claim on the policies they have taken out - such as people employed in agency work or who are self-employed.

"Other clients have found that they are not covered because of their age. Information about exclusions is often hidden in small print and not made clear to consumers when they first consider taking out PPI." Research by CAS has found that over 90% of claims made on PPI policies had been turned down - usually on exclusions relating to medical conditions.

A north of Scotland client who bought a car with a £7000 loan was told he had to take out PPI with a specific com- pany, adding over £3000 to the loan amount, and £6000 when interest on the loan - and the policy - were added.

A west of Scotland client who was in receipt of income support and carer's allowance had been sold PPI by a bank despite having been unemployed for six years. The bank "eventually agreed to refund the insurance - a sum of £1700".

A retired 67-year-old south of Scotland client was persuaded to borrow £2600, on top of a £7300 loan, to buy insurance against losing her job. When questioned, the bank admitted that "the person dealing with her application would have been under pressure to sell insurance".

The only policies affected by the FSA's new ruling on partial refunds are "single premium" (one-off payment), and the refund entitlement does not apply to cancelled policies. That means millions of people who, like Jim Brogan (case study), have surrendered PPI-linked endowments have lost out, though under the new rules they would be entitled to refunds when surrendering.

Simon Burgess of British Insurance, a low-cost provider, believes the FSA should ban single premium policies altogether as they fly in the face of its new mantra "treating customers fairly".

Burgess says: "In the mortgage sector, the cover lasts around five years, and then the consumer is contacted and asked to take out another policy with more expense. This is under the guise that medical conditions may change, but really it's a way of getting a further premium.

"Single premium mortgage payment protection is designed to provide short-term cover, so it's useless for a 25-year loan. Consumers mistakenly believe they have paid for something that will cover them for the lifetime of their mortgage and it won't."

CAS is calling for improved training for staff selling PPI, more accessible policies that clearly state all exclusions from cover, and tighter monitoring of the system of targets and bonuses for PPI policy sales.

Lyle says: "We want exclusions to be spelt out to customers verbally by sales staff, not buried in the small print." She says that at present, instead of giving peace of mind, the policies are "squeezing a lot more money from them for protection' that too often turns out to be illusory".

The Financial Ombudsman Service recently reported that PPI complaints had rocketed by 39%. It says: "We are not seeing so many appeals about claims being rejected, rather that customers believe they were mis-sold a policy in the first place." Around one complaint in three which reaches the formal stage is successful.

Burgess says: "Enough research has been carried out, so why has the Commission set a deadline for February 2009 for the implementation of remedial measures? I'm astounded the Competition Commission isn't moving more quickly to prevent consumers being ripped off and suffering financially."

l British Insurance suggests this mis-selling checklist: a) Were you told the policy was optional?

b) Were you told the policy was compulsory to obtain the loan?

c) Were you told or shown phrases like "fully protected loan repayments" without an explanation that you had accepted PPI cover?

d) Were you given a statement of Demands & Needs?

e) Were you given the appropriate Financial Services Authority (FSA) documentation at the appropriate time?

f) Were you allowed to check the policy terms and conditions prior to sale (either face to face or via online sales)?

g) If you cancelled early, were you given a return of premiums?

h) Were you asked whether you had any insurance in place that already covered the risk?

i) Were you asked about your employment status and whether you had any pre- existing medical conditions?

Wrong advice
When engineer Jim Brogan took out a Standard Life endowment policy through Clydesdale Bank, he says the bank advised strongly that he should take out payment protection insurance (PPI) which covered him for critical illness, writes Simon Bain.

When Jim was diagnosed with ulcerative colitis, a non-threatening condition but one which kept him off work for more than a year, he assumed the insurance would help.

"When I looked into the policy I found it did not cover me."

His condition was not on the list, because its effects can vary from mild to incapacitating.

"I was annoyed when I went back to work and I started to look at things more closely. I asked for the insurance to be taken off but they said no refund was possible. I had no option but to cancel the whole policy."

A complaint to the Financial Ombudsman Service was unsuccessful, with the ombudsman ruling that the bank salesman had informed him fully about the insurance cover.

As part of its "crackdown", the Financial Services Authority has at last banned the sale of "nil refund" contracts and has forced providers to "contact existing customers" to explain their rights to partial refunds if policies are cancelled.