PPI set to be banned by the Competition Commission
The High Street banks of the United Kingdom are looking at a lost source of revenue as the regulator insisted they would still press on with their desire to ban Payment Protection Insurance (PPI) at the point of sale. The Competition Commission has stated that it will ban the sale of PPI alongside the sale of financial products such as loans, credit cards and mortgages.
This decision means that the banks will no longer be able to sell this highly controversial insurance product at the time they decide to borrow, or during a fixed term after they have taken out the loan. It has been suggested that most purchasers of PPI had no idea that the insurance was available from insurance providers other than the lender. This meant that they rarely shopped around for a better deal on price or terms.
The product has also been at the centre of a huge mis-selling scandal. PPI Claims are on the rise and the amount of mis-sold PPI policies is estimated to be in the millions.
Peter Davis, who is the deputy chairman of the Competition Commission, said: “We found that many customers would place significant value on being given the time to choose the right PPI product – or indeed to decide that PPI is not right for them.”
The ruling that was given mirrors the initial ruling their first judgement which was given last year, when the Competition Commission suggested similar action. The decision was challenged by Barclays Bank and Lloyds TSB, when a review was ordered by the Competition Appeals Tribunal. The banks had argued that people were happy to purchase PPI from them at the point of sale and that they would find it inconvenient to have to wait to purchase it after the sale, or to be forced to find an alternative provider of PPI.
However, Mr Davis went on to say “Overall, we concluded that Payment Protection Insurance providers are overstating the loss of convenience that would result from the introduction of a prohibition on selling Payment Protection Insurance during the sale.”
The banking industry are not happy with this outcome, suggesting that bankruptcies may increase as people have no alternative to solve their debt problems as they have no method of repayment.
PPI has generated over £1.5bn per year profit for the industry between 2004 and 2009, which the payments given to the insured are well below other averages when compared to car insurance and home insurance.
The banks repaid £177m compensation to victims of mis-selling in the first 11 months of 2009, with much larger figures expected for next year.
If you have been mis-sold PPI, please visit www.ppi.co.uk to make a claim for PPI Compensation
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