Sale of PPI with credit agreements to be stopped

Many campaigners and PPI critics have welcomed recent news from the Competition Commission with regards to the sale of payment protection insurance alongside credit agreements. The Competition Commission has stated that from 2010 the sale of single premium PPI alongside credit agreements such as loans and credit cards will be banned.

As part of the new regulations lenders will only have to wait seven days instead of fourteen days to contact customers and see if they want to take out the cover, although the borrower will be able to contact the lender within twenty four hours if they want to take out cover. Single premium PPI has come under intense fire over the past couple of years, as the cover is paid as a lump sum and added to the cost of the finance, leaving borrowers to pay interest on it.

The Competition Commission is hoping that the new regulations will create greater competition in the market, with one official stating: ‘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.’

The purpose of PPI is to cover repayments on a debt for a specified period of time in the event that the policyholder cannot meet the repayments due to sickness, injury, or redundancy, but investigations have revealed that the cover has been widely mis-sold, often to those that can never actually make a claim on the cover.