Payment Protection Insurance is designed as a safety net for people taking out personal loans, credit cards, mortgages and high-value credit purchases on items such as cars or furniture. PPI comes into effect if borrowers lose their job, fall ill, have an accident or die before the loan is paid off.

 

Around 12 million policies are in circulation, with the market worth £3.8 billion a year. Ninety per cent of policies sold in Britain are for unsecured personal loans, credit cards, mortgages and secured loans.

 

Regulators have been concerned for some time that selling PPI when a loan or credit card is agreed not only reduces competition and prevents prices from coming down but also unfairly pressures consumers into buying products that either do not suit them or are irrelevant.

Regulators believe that giving consumers the time and space to consider which PPI policy suits their needs will improve competition as they will have the breathing space to check out other providers or even decide against the insurance altogether.

PPI is a big money-spinner for lenders, netting some high street banks up to £250 million a year. Barclays, backed by Lloyds, lodged an appeal with the Competition Appeals Tribunal to block the ban last year. Despite the competition watchdog’s new report containing some concessions it appears unlikely that they will take this lying down.

Mis-selling in the PPI sector is rife, with thousands of people claiming to have been pressured into buying insurance they did not need or that will never pay out. This ruling is not retrospective, though, so aggrieved policyholders will have to take up the issue with the PPI provider or seek help from the Financial Ombudsman Service.

 

Advice: For help with PPI Claims and PPI Reclaims please call 0800 043 1683.  

Source: The Times