PPI Crackdown Proposed By The Competition Commission
Thursday 13 November 2008
A major crackdown on the sale of Payment Protection Insurance (PPI) policies has been proposed by the Competition Commission.
The Competition Commission has suggested that the policy should not be sold to a customers within fourteen days of a loan being finalised.
In the past PPI policies were often sold at the same time as a loan, or a credit card, with this lack of competition, providers were often able to charge high prices for the policy.
The Competition Commission feel that a fourteen day window would allow customers adequate time to shop around for the PPI policy, to help them find a better deal.
Consumers will be able to contact companies within 24 hours of getting a loan or credit card from the company they have had the credit from.
However, instead of agreeing to take out the protection, the commission suggested that the customer be offered a personal quote of sorts, which would outline the total cost. This would help to ban “single premium” policies which are added onto the total debt, ultimately preventing customers from being able to switch, or transfer their policy elsewhere.
Although this does sound like a good idea to help customers, this announcement has been met with fierce criticism from groups representing providers.
Stephen Sklaroff, the director general of the Finance and Leasing Association, said that "Preventing customers from buying PPI when they take out new credit will mean that many vulnerable people go unprotected just when unemployment is rising sharply," As well as warning that this proposal could result in the cost of credit being raised and that the loss of single-premium PPI policies could result in customers being worse off.
The sale of these policies has come under fire over the past three years, which the Competition Commission stating that they believe that the vast majority of more than thirteen million PPI policies were sold at the same time as loans or credit cards.
Teresa Fritz a personal finance expert, welcomed the Commission's report, believing that up to two million people who had been sold such a policy were told that they were in deed ineligible to claim on it, due to the small print.
Recently the Financial Ombudsman Service (FOS) demanded that the FSA take action to stop banks from giving customers the proverbial run around when they complain about Mis-Sold PPI.
The FOS are being bombarded with around one hundred complaints a day, which is the biggest source of grievances.
The FSA has been taking a strong stance against firms who are found guilty of mis-selling ppi, the £7m fine issued to Alliance & Leicester is a prime example of this.
The Competition Commission said it was putting out today's recommendations for a final round of consultation, with a decision expected to be made in mid-January.