PPI sales ban confirmed by Competition CommissionPoint-of-sale prohibition to go ahead

14 May 2010

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The Competition Commission has announced its provisional decision to ban the sale of payment protection insurance (PPI) alongside most credit products.

The ban was part of a package of measures announced by the Competition Commission following its investigation into the sale of PPI, which concluded that businesses faced little or no competition when selling the product to their customers.

Barclays, backed up by Lloyds Banking Group and Shop Direct Group Financial Services Ltd., challenged the prohibition on the basis that it might excessively inconvenience consumers. However, the Competition Appeal Tribunal, who investigated Barclays’ claim, has concluded the ban should go ahead.

Point-of-sale PPI prohibited

Peter Davis, inquiry chairman and deputy chairman of the Competition Commission, said: ‘We’ve done an enormous amount of additional work to examine in further detail whether the package of remedies we’re proposing, including the point-of-sale prohibition, will provide an effective and proportionate way of tackling the serious problems that still exist with PPI.

‘Overall we concluded that PPI providers are overstating the loss of convenience that would result from the introduction of a prohibition on selling PPI during the credit sale.’

Which? chief executive Peter Vicary-Smith commented: ‘People need to protect their finances but PPI has been widely discredited because of its expense and the poor cover it offers. 

'Point-of-sale PPI puts consumers in a position where they have to choose between a shoddy protection product or no protection at all. It’s important that PPI is sold separately from other financial products to help consumers make an informed choice ad find the protection product that best suits their needs.

‘The industry should now concentrate its efforts on developing protection products that offer better cover and value for money to its customers.’

What is payment protection insurance?

PPI covers repayments on credit products such as personal loans and loans if the borrower is unable to cover them due to illness, accident, unemployment or (in the case of some policies) death. PPI sold alongside mortgages is often referred to as mortgage payment protection insurance (MPPI).

In 2009, the Competition Commission declared that the vast majority of PPI policies sold in the UK were purchased alongside credit products. It also found that consumers were often unaware they could buy PPI from other sources, did not shop around or compare cover and rarely switch PPI providers.

The sale of ‘single premium’ PPI was banned last May, after a long campaign by consumer groups including Which?. This practice involved loading the total cost of a PPI policy on top of the funds being drawn down by a borrower, so that he or she would have to pay interest on the cost of the insurance, as well as interest on their loan.

Mis-sold PPI and reclaiming your cash

Which? has also campaigned strongly against the mis-selling of PPI, which has caused outrage in recent years.
Some consumers who did not need, did not want or would not be covered by PPI in the event they tried to claim have been sold the product by lenders – in some cases, without even realising it.

If you think you’ve been the victim of PPI mis-selling, be sure to check out the Which? PPI reclaiming guide. It features a short PPI video that explains how to work out whether you can make a claim, plus a free online PPI claiming tool that has already helped many consumers get thousands of pounds back from PPI providers.

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