PPI crackdown to start next year, says Competition Commission

A crackdown on providers of payment protection insurance, including a point of sale ban, has been welcomed by consumer campaigners as a decision that ‘sounds the death knell’ for the controversial cover.

The Competition Commission this morning announced its long-awaited conclusions on the insurance, which covers mortgage loans and credit cards. As well as the ban on the sale of PPI during the sale of the credit in question, lenders will not be able to offer single premium policies, while they will have to provide much more information to consumers.

The commission has brought in the measures, which come into force in 2010, as it concluded that there was a serious lack of competition in the market with few aware that they can actually shop around for the product and few switching providers.

Louise Hanson, head of campaigns at consumer group Which? said that the decision was long overdue as consumers have suffered from ‘shoddy, expensive and inadequate protection’.

‘It’s a great shame that since we began campaigning for better products, many people have wasted millions of pounds on PPI and have been ripped off in the process,’ Hanson said.

Providers, however, warn that the crackdown comes at the wrong time. With the UK jobless level having hit an 11 year high recently at 1.825 million, the number of people claiming on their payment protection insurance has doubled, they say.

Nick Starling, a director at the Association of British Insurers said: ‘The point of sale ban carries significant risks for borrowers, mainly by leaving them unprotected at a time when unemployment cover has never been needed more.’

But Which? said that the industry could now concentrate on products that consumers actually need to protect their finances.