The UK’s Competition Commission has
provisionally banned point-of-sale payment protection insurance, or
PPI, after finding that banks and building societies offering the
insurance often make big profits and offer little choice to
consumers.
The latest report in a long-running battle to
ban PPI alongside personal loans, mortgages and credit cards, comes
despite a legal challenge by Barclays, supported by Lloyds Banking
Group.
Go deeper with GlobalData
The watchdog, which worked closely with the
UK’s regulator the Financial Services Authority and the Financial
Services Ombudsman, found that businesses that offer PPI alongside
other forms of credit face little or no competition when selling
PPI to their credit customers. This in effect costs customers more
for less choice.
“All customers of course will appreciate the lower prices for
PPI and the greater choice we expect to result from more
competitive PPI markets,” the Commission said.
It added that whilst the financial crisis and recession have had
an effect on providers’ sales, it has not changed the “fundamental
competition problems”.
The reforms were proposed in 2008 threatening
the UK’s retail banks with more competition in the PPI market (see
RBI 595).
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By GlobalDataPPI providers have also been accused of
“overstating the loss of convenience” that would result from a ban
on selling PPI during a credit sale.
PPI covers repayments on credit products if the borrower is
unable to make repayments due to accident, sickness, unemployment
or death.
