The competition watchdog, which has argued that lenders have an unfair advantage by selling insurance at the point of sale, said that it wanted to encourage more price competition.

It has pushed for a cooling-off period to ensure that consumers who take a loan or a credit card have adequate time to consider alternative providers and which product is most suitable, and intends to implement the changes this summer.

The commission proposed the ban early last year but was held up by a legal challenge from Barclays. The Competition Appeals 

Tribunal ruled that more work needed to be completed on how the ban could cause inconvenience for customers.

The commission conducted a detailed analysis and decided to exclude retail PPI from the regulation. A spokesman said that retail represented 2 per cent of the market for PPI, mainly through catalogue providers, and that the payments were generally too small to justify spending time looking for a better deal.

Peter Davis, deputy chairman of the commission, said the watchdog had done an “enormous” amount of work to consider whether the ban was the best way to deal with the serious problems that exist with PPI.

“We found that many customers would place very significant value on being given the time and space to choose the right PPI product — or indeed to decide that PPI is not right for them,” he said.

He also argued that PPI providers had overstated the case that customers would be inconvenienced. “PPI customers currently have little choice and prices are high because competition is limited,” he said.

The commission has invited comments from the industry before making a final ruling in July. It said that it intended to implement the ban “as swiftly as possible”.

Source: The Times