Major lenders and financial services companies have agreed to change the way they sell Payment Protection Insurance (PPI) on the internet following action by the Financial Services Authority (FSA).
PPI is an insurance policy sold to customers taking out credit cards, store cards, loans and mortgages, that promises to cover monthly payments should the customer become unable to work, usually due to illness.
There has been a great deal of controversy recently surrounding PPI following reports that a number of firms had been using very poor PPI selling practices, whereby they were pressuring customers into buying PPI when they didn’t really need or want it, or not fully explaining the terms and conditions on sale.
Via the internet, many firms were using a pre-ticked box for selling PPI which led to many customers buying payment insurance without making an active decision to do so.
The FSA has now got the major firms to agree to stop using this technique; customers will now have to actively choose to buy PPI.
This latest move is just a small part of a major investigation by the FSA into PPI selling practices; in March, the FSA secured an agreement with a number of trade associations on greater fairness and transparency with regard to refunds of single premium PPI policies and last month the FSA proposed changes to its Insurance Conduct of Business rules designed to improve selling practices on PPI and other protection products.
Based on its investigation into the PPI market so far, the FSA has taken enforcement action against nine firms for breaches in relation to poor PPI selling practices.
Vernon Everitt, FSA Director Retail Themes, said: "We have made PPI a top priority and are pleased that firms have agreed to change the way they sell PPI over the internet.
“Naturally, many customers are focused on getting the loan itself, but it is just as important that they also think about whether or not they want to protect their loan repayments by taking out PPI cover.
"This change means that it will be up to the customer to actively choose to buy PPI rather than it being sold automatically."
Find out more about Unfair Payment Protection Insurance