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Consumers celebrated a victory yesterday against payment protection insurance providers after the Competition Commission concluded a two-year investigation into mis-sold policies.
There has been mounting criticism over the way banks and credit card companies have been selling PPI with loans and mortgages. The insurance is intended to protect the consumer in the even they are unable to make payments due to sickness, unemployment or injury.
The Commission, however have now ruled that lenders had an unfair advantage selling PPI policies with credit products, when a cheaper policy may be found elsewhere. Their findings has resulted in PPI providers being banned from offering policies with credit cards or loans.
Starting from 2010, banks and other companies who offer loans or credit must observe a 7-day period before they can sell PPI to the borrower.
The Commission have also banned single premium PPI, which combined the cost of the loan with the insurance meaning the consumer paid interest on both.
Consumers have been complaining for years about the way in which PPIs are sold. The costs and terms of the policy are often not fully explained and only 11% of policyholders are eligible to claim. People who are unemployed, self-employed or who have a history of back problems for instance, will not eligible for cover.
Debts.org is among other consumer interest groups in welcoming the new ruling. This website has already been running a claims management service for people who have been mis-sold PPI and expects many more to be applying for compensation as a result of this extra publicity.
The British Bankers Association, however, had some grievances with The Commission’s decision. A spokesperson argued that in times of uncertainty surrounding job security, insurance cover was a must for anyone with debt. Adding; “It is totally without conscience to encourage people to borrow without back up. This is an irresponsible decision exposing vulnerable customers to economic difficulty when they may need help most.”
It has to be said, however, that The Commission was not implying cover was unnecessary but rather that the way it was sold was unfair to the consumer. Consumers would be advised to buy payment protection insurance after shopping around for the best deal and in full knowledge of the terms and conditions.
