Payment protection insurance banned at point of sale

Payment protection insurance banned at point of sale

14 May 2010 / by Rachael Stiles

Payment protection insurance will no longer be allowed to be sold alongside the product for which it is intended, the Competition Commission has announced today.

After months of debate, the Competition Commission has followed through on previous proposals to prohibit lenders from cashing in on a captive audience by selling payment protection insurance at the same time as the loan or credit card the customers are taking out.

Point of sale PPI puts the consumer at a disadvantage, critics say, because they are often not given all the information necessary about the product, and are not given a chance to shop around. Many have even been missold loan insurance which was not appropriate for them, or that they did not need.

All forms of payment protection will be banned at point of sale, with the exception of retail PPI, such as repayments for shopping through home catalogues, which accounts for about 2.5 per cent of all PPI premiums.

Through its investigations into the PPI market, the Competition Commission said today that it has "concluded that the benefits of a package of remedies including the prohibition, by introducing greater competition and choice and lower prices to the market, will outweigh the disadvantages, in particular the potential inconvenience to some customers."

Peter Davis, inquiry chairman and CC deputy chairman, said: "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. We also found that a significant number of customers appreciate the convenience of buying PPI instantly at the point of sale of credit.

"Overall we concluded that PPI providers are overstating the loss of convenience that would result from the introduction of a prohibition on selling PPI during the credit sale. All customers of course will appreciate the lower prices for PPI and the greater choice we expect to result from more competitive PPI markets."

Commenting on the CC's decision, Tim Moss, head of loans and debt at, said "It is good news for consumers that the Competition Commission has looked into this matter and I would hope banks will respond by introducing better products which will truly protect consumers."

The PPI industry has suffered at the hands of a few unscrupulous lenders, he said, and has become a "cash cow" for the banking industry, resulting in instances of misselling for many.

But, he added, "we need to be careful not to throw the baby out with the bathwater - PPI is a useful product for many consumers giving them peace of mind at a time of financial uncertainty."

"Consumers should still consider protecting their repayments, and shop around to find the best solution for them, which may be through specialist insurers, rather than from their loan provider."

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