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February 6, 2009updated 13 Apr 2017 8:57am

Reform at last of UK PPI market

With the backing of the UKs Competition Commission (CC), proponents of reform of the countrys payment protection insurance (PPI) market have scored a major victory Following a lengthy evaluation of the market which culminated in the publication of a consultation paper in November 2008 (see LII 230), the CC has announced sweeping changes to the PPI market that will come into force in 2010 A ban on the sale of single premium PPI policies;

By LII editorial

With the backing of the UK’s Competition Commission (CC), proponents of reform of the country’s payment protection insurance (PPI) market have scored a major victory.

Following a lengthy evaluation of the market which culminated in the publication of a consultation paper in November 2008 (see LII 230), the CC has announced sweeping changes to the PPI market that will come into force in 2010.

The most significant of these are:

• A ban on the sale of single premium PPI policies;

• Prohibition of the sale of PPI by a credit provider within seven days of the sale of credit;

• Credit providers must give consumers a personal PPI quote stating cost of insurance on its own and when added to the credit product; and

• Provision of an annual statement to PPI customers reminding them that they can cancel the policy.

“This decision helps sound the death knell for PPI,” said Louise Hanson, head of campaigns at consumer group Which?.

She continued: “For too long too many consumers have suffered from shoddy, expensive and inadequate protection. It is a great shame that since we began campaigning for better products, many people have wasted millions of pounds on PPI.”

According to the CC’s findings, there were just over 4.34 million active single premium PPI policies sold by the 12 largest distributors at the end of 2006.

Preempting the CC’s decision, five UK banks ceased selling single premium PPI at the end of January – Alliance & Leicester, Barclays, The Co-Operative Bank, Lloyds Banking Group (Lloyds TSB, Halifax, and Bank of Scotland), and Royal Bank of Scotland/Natwest.

Not all are impressed with the banks’ decision, among them Anthony Sultan, a Claims Standards Council executive member and MD of The Financial Claims Service, a company dealing with claims against banks and lenders.

“It has taken the commission’s report into the sale of payment protection insurance to force the banks into action – even if it was days before being damned,” said Sultan.

“In reality, the Financial Services Authority should have been applying pressure long time before the conclusion of this 23-month investigation.”

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