OFT sends PPI to Competition Commission

The decision is out. The Office of Fair Trading has decided to refer the UK payment protection insurance (PPI) market to the Competition Commission for further insurance. The move has been in the works since October 2006 and it follows a period of public consultation. The OFT says its initial concerns are still valid and therefore an investigation by the Competition Commission is justified.

OFT chief executive John Fingleton commented: ‘Our examination of the evidence presented to date gives us reasonable grounds to suspect that there are features of this market which restrict competition to the detriment of consumers. Despite some evidence of a degree of consumer satisfaction with aspects of the product, the evidence as a whole suggests consumers get a poor deal. This referral will enable the Competition Commission to undertake a thorough investigation of the market and, if necessary, ensure that appropriate remedies are put in place.’

Reaction to the decision has been mixed. The Council of Mortgage Lenders (CML) has expressed disappointment because of the inclusion of mortgage payment protection insurance in the referral. CML Director General Michael Coogan said: ‘MPPI is a vital safety net for many households, and this referral sends out entirely the wrong message to consumers. While we will co-operate as fully as possible with the Competition Commission to examine the issues, we are extremely disappointed that the special and unique position of MPPI has been ignored by the OFT in reaching this counter-productive decision.’ The CML’s disappointment has been echoed by the Association of Mortgage Intermediaries.

However, other organisations have welcomed the move, the British Insurance Brokers Association (BIBA) among them. BIBA chief executive Eric Galbraith said: ‘BIBA welcomes the Office of Fair Trading’s decision. It is only once consumers are made more aware that PPI cover is available from sources other than the lender, and more providers, be they intermediaries or insurers enter the market, will we see improved competition, with better cover and lower costs.’

The Motley Fool is similarly delighted. David Kuo, Head of Personal Finance at Fool.co.uk said: ‘These vulgar products purport to offer peace of mind, but the vast majority of PPI products disappoint policyholders at the time when they need them most. They are grossly overpriced, widely mis-sold and cocooned in small-print to thwart genuine claims. For many years Fool.co.uk has warned consumers of these obscene products, and we are therefore delighted to see that our efforts have not been in vain.’