Thousands of borrowers are poised to challenge lenders over debt insurance, in what has been hailed a new consumer revolution against mis-selling and unfair charges.

Consumer advice Web site said 70,000 people had downloaded template letters in the past two months to try to reclaim costs associated with payment protection insurance (PPI).

The policies are designed to cover the repayment of loan, credit card or mortgage debt if people fall ill or lose their jobs, but has long been criticised as aggressively sold, expensive and failing to provide the anticipated level of cover.

There are more than 20 million PPI policies in place, according the Office of Fair Trading (OFT).

The industry generates 5 billion pounds-worth of premiums per year, but only 20 percent of that is paid out in claims, compared to 82 percent of car insurance revenues and 54 percent of home insurance premiums.

The OFT said last year that Britons could save 1 billion pounds per year with greater competition in the PPI market and, earlier this year, referred the sector to the Competition Commission.

Martin Lewis, founder of, said PPI revenues were three times those from bank charges, which have come under fire of late.

Consumers have so far reclaimed an estimated billion pounds in unfair bank charges, levied when a cheque bounces or balances slip into the red beyond an agreed overdraft for example.

I think PPI reclaiming could be bigger, said Lewis. Of the 20 million policies in the UK, I wouldn't be surprised if half had been mis-sold.

Some have this insurance without realising it or were told it was compulsory when it wasn't, others are paying for it when it doesn't actually cover them.

This big protection racket isn't run by underworld crime barons -- but genteel bankers in posh suits.

A mystery shopping exercise by consumer group Which? found that consumers were being duped into taking out the cover. It discovered that many loan providers automatically included PPI in quotes requested over the telephone and Internet.

Commenting on the anticipated consumer revolt, Doug Taylor, of Which?, said: The issue isn't just to get people to claim money back for mis-sold PPI.

We want them to find out if they have PPI, whether they need it or not and whether there are more suitable products out there for them.

Even if their PPI was sold to them legitimately, it doesn't mean they need it or have to keep paying for it.

Adding the cover to a 7,500-pound loan, taken out over five years, would cost up to 3,000 pounds more, he said.

Rachel Hauxwell, 33, from Nottinghamshire, successfully reclaimed PPI premiums from Firstplus: it sold her the cover on a 16,000-pound secured loan even though she and her husband were covered by a separate policy.

I sent the letter on August 30 and we got the cheque for 4,600 pounds at the beginning of October, she said.

I tell everyone that I speak to that they should reclaim too.