PPI with loans to be banned
Officials from the Competition Commission have recently confirmed that the sale of the controversial insurance cover known as Payment Protection Insurance or PPI is to be banned in 2010.
Once the ban on the sale of the cover has been put into place lenders will no longer be able to sell this cover alongside credit agreements. The Competition Commission has also reduced the amount of time that lenders must wait before contacting customers to see if they want the cover, from fourteen days to seven days.
As part of the rules consumers will be able to contact the lenders themselves within twenty four hours if they wish to take out the cover, which is designed to cover repayments on a debt for a specified period in the event that the borrower cannot make repayments due to sickness, injury, or redundancy. Single premium PPI sales will also be banned under the rules, and this is where the cost of the cover is taken as a lump sum and added to the loan, which means that the borrower has to pay interest on it.
However, the Association of British Insurers has expressed concern that the ban on PPI could cause problems for many borrowers, particularly given the current economic and financial climate, where many were concerned about losing their jobs. PPI has been under fire for some years after investigations revealed that it was being mis-sold in a number of ways, and often consumers were being forced into taking the cover or having it added to their credit without even being told.
One official from the Competition Commission said that the measures had been put into place to protect consumers. He said: ‘Consumers’ interests are not best served when the only choice the vast majority have is whether or not to purchase their credit provider’s PPI product. The resulting lack of competition means that the only offer consumers get is simply worse value than they are entitled to expect.’
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