The banking and insurance industries are mis-selling Payment Protection Insurance, the leading consumer charity Citizen's Advice has claimed.

Now the body is planning to invoke its legal powers to make a "super complaint" to industry watchdog, the Office of Fair Trading, over company practices.

Payment Protection Insurance, or PPI, is meant to provide for the repayment of debts, such as loans and mortgages, when a policy-holder dies or falls ill, becoming unable to work and earn.

However, Citizen's Advice alleges that many lenders include many unreasonable exceptions under their policies, refusing to pay out when people are incapacitated with back problems or mental illness, imposing age limits on policies, and excluding self-employed people.

Citizen's Advice accuses the £5 billion industry of deliberately designing policies that exclude most circumstances in which a policy-holder would need to claim.

The charity claims that 85 per cent of all claims on PPI policies are turned down ? a figure the industry contests, arguing that it is closer to 15 per cent.

The super complaint follows a similar condemnation of PPI by Which? Earlier in the year.

PPI is a massive money-spinner for lenders stuck in an extremely competitive market, with around 20 million policies held nationwide.

A recent report by Morgan Stanley claimed that 20 per cent of pre-tax profits at internet bank Egg came from PPI, while the figure was 17 per cent for Lloyd's TSB and 12 per cent at Alliance and Leicester.

PPI costs are often high, sometimes as much as a quarter of the sum borrowed. While there is no compulsion for any borrower to take out the insurance, the sums involved can tempt some salesmen into an excess of zeal.

However, the banks deny any wrongdoing, insisting that sales are heavily regulated.

"The Financial Services Authority regulates the sale of PPI and what cover is made clear to purchasers", British Bankers Association spokesperson Brian Capon told the BBC.

The Office of Fair Trading is obliged to make a public response to Citizen's Advice's complaint with 90 days, and has so far refused to comment.

David Harker, chief executive of Citizens Advice, said: "We badly need an official investigation of how this market is operating, leading to effective regulation that ensures a fair deal for all consumers, and which also protects the most vulnerable."

He added: "People are lulled into a false sense of security, only to find that far from providing protection against an unexpected drop in income, payment protection insurance often just adds to their debt.

"At best the excessive cost for minimal benefits makes it bad value for many people; at worst mis-selling means the most vulnerable are parted from large amounts of money under false pretences and left even more exposed to debt."

Citizen's Advice is also calling on the House of Commons' Treasury Select Committee ? which delivered a public battering to the credit card industry in 2003 ? to investigate the industry.

The charity decided to bring the matter before the OFT following numerous complaints raised by members of the public seeking assistance at Citizen's Advice Bureaux.