Competition Commission step nearer to banning PPI

| May 16, 2010
”Competition

The Competition Commission is pressing ahead with its proposal to ban the sale of the controversial payment protection insurance (PPI).

Under a PPI policy, an agreed sum of money is paid out each month to fully cover, or cover a percentage of the payment due on your mortgage or loan if you are unable to work, as a result of becoming unemployed or sick.

However, it was established last year that financial providers commonly boosted their profits by incorporating the cost of a one-off PPI premium into a loan.

Furthermore, many complaints were received after borrowers with PPI found themselves paying extra interest, while a significant number complained that they were unaware of having taken out the insurance policy.

It was found that millions of PPI policies were mis-sold and in September 2009, City Watchdog the Financial Services Authority (FSA), proposed a major overhaul of the rules.

Following the Commission’s enquiry, Barclays disputed some of the findings and consequently, the Appeal Tribunal asked the Commission to reconsider the ban or justify its position further.

As a result, the Commission has invited comments from the industry before making a final ruling in July.

Peter Davis, deputy chairman of the Commission, said the Watchdog had carried out a huge amount of work to consider whether the ban was the best way to deal with the serious problems that exist with PPI.

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