Personal Loans Will Not Be Sold With PPI, Says Watchdog
The Competition Commission announced plans this week to ban the sale of payment protection insurance (PPI) at the same time as unsecured personal loans, credit cards and mortgage deals.
The plans were originally for a complete ban, but the commission eventually decided to ban PPI sales at the point-of-sale of personal loans and other financial products. Instead, lenders will be able to offer PPI after seven days have elapsed since the original sale.
It originally announced the plans in October 2009, after which it faced a legal challenge from banking giant Barclays. With the support of Lloyds Banking Group and Shop Direct Group Financial Services, Barclays claimed that the proposals were not proportionate and unjustified, and the Competition Appeal Tribunal ordered the watchdog to investigate whether an outright ban would be bad for customers.
However, after considering the evidence, the Competition Commission announced this week that a ban on point-of-sale PPI would improve competition in the personal loans market and eventually lead to lower prices. This would outweigh any disadvantages of the move, it said.
PPI ensures that payments towards unsecured personal loans, mortgages and credit cards will continue to be made if the borrower is left financially embarrassed due to long-term sickness, unemployment or accidents.
If the Competition Commission decides to stick to its provisional decision this week, it has pledged to introduce the point-of-sale ban as “swiftly as possible”. Barclays declared itself disappointed by the watchdog’s decision, and a spokeswoman said: “We still maintain that to prohibit PPI being sold at the point of credit sale and for a fixed period afterwards will limit rather than enhance customer options and will result in customers being exposed as unprotected.”
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