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FSA bans lenders from selling PPI

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by David Masters
FSA bans lenders from selling PPI

The Financial Services Authority (FSA) has banned lenders from selling payment protection insurance (PPI) alongside unsecured personal loans.

Starting today, banks and other loan providers are no longer allowed to sell PPI, the FSA has ruled.

“No firms will be selling single premium PPI on unsecured personal loans from today following FSA intervention and action with the industry,” the FSA said.

The decision follows an FSA report that raised “ongoing concerns” about how PPI is sold.

Major lenders, including Alliance & Leicester, Capital One, Liverpool Victoria, Egg and GE Capital, as well as a number of retailers, have all been fined by the FSA for mis-selling PPI policies.

When they were caught mis-selling, the lenders were forced to refund consumers with thousands of pounds.

PPI insures borrowers in case they are unable to make loan repayments due to long term illness or being made redundant.

Previously, PPI was often sold by lenders alongside personal loans, with the cost paid upfront and added to the total of the loan taken out.

However, borrowers with PPI found themselves paying extra interest, and a significant number complained that they were unaware of having taken out the insurance policy.

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News posted: June 1, 2009

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