Lenders to stop selling single premium PPI by end of May

UK authorities have said that lenders in the UK must stop selling single premium PPI by the end of next month, otherwise they could face serious penalties. Single premium PPI is a type of payment protection insurance that has been under fire for some time because of the costs involved for consumers, as well as because it has been widely mis-sold.

PPI is designed to cover repayments on a debt for a set period of time if the policyholder cannot make repayments due to redundancy, sickness, or injury, and is sold alongside credit cards, loans, etc. With the single premium cover the total cost of the cover is added to the finance, and the consumer therefore ends up paying interest on the insurance as well as on the actual finance itself.

The Financial Services Authority has written to financial firms about stopping the sale of single premium PPI, stating: ‘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.’

It was also found during investigations over the past couple of years that PPI was being widely mis-sold, often being sold to those who were not eligible to make a claim and even added to finance without the knowledge of the borrower.