Single premium PPI to be stopped soon
Lenders and PPI providers have been told by regulators that they will have to stop selling the highly controversial single premium PPI, or payment protection insurance, over the coming months, and providers have now been given a deadline by which they must have ceased selling this type of insurance cover.
The Financial Services Authority has said that lenders will have to stop selling single premium PPI by the end of May.
The chief executives of companies that currently sell single premium PPI have been contacted by the Financial Services Authority, and have been informed that they must stop selling this costly cover by 29th May.
This came after the Competition Commission decided on a ban on the sale of this type of PPI following heated controversy and its own reviews. With single premium PPI the cost of the cover is added to the amount borrowed in a lump sum, and this means that the borrower ends up paying interest on the cost of the insurance as well as on the loan itself.
In the letter that was sent out to firms the FSA stated: ‘We therefore request that if your firm has not already done so, it stops selling single premium PPI with unsecured personal loans as soon as possible and in any event by 29 May 2009. In view of our ongoing concerns across the single premium market over the standard of sales, we believe this request is justified to bring an orderly withdrawal of single premium PPI from the market.’
PPI has been sold alongside credit and finance for many years, and this includes credit cards, loans, and car finance. It is designed to cover the repayments on the debt for a specified period of time in the event that the policyholder cannot make repayments due to sickness, injury, or redundancy.
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