The Competition Commission has confirmed a ban on the sale of PPI at the point of sale of personal loans, mortgages and credit cards.
The Competition Commission (CC) has confirmed a ban on the sale of payment protection insurance (PPI) at the point of sale of personal loans, mortgages and credit cards.
Banks and building societies will no longer be allowed to sell the insurance alongside other financial products; instead they will have to wait seven days before contacting the consumer to see if they want to buy cover. The ‘point of sale prohibition’ is longer if a personal PPI quote is not issued until later as there must be a seven day gap between the quote being issued and PPI sale.
The CC’s re-drafted plans, still at a preliminary stage, are similar to measures announced last year that were successfully appealed by banking giant Barclays. The only difference this time is that the point-of-sale ban will not apply to PPI sold via catalogue merchants, but this only accounts for 2% of the market, according to the CC.
The CC is also introducing a package of measures to boost competition in the market. These include requirements to provide a personal PPI quote setting out the cost along with details of the cover provided, and ‘key messages’, for example making it clear that PPI is optional and available from other providers.
Sellers will be obliged to provide information about claims ratios to any person on request. There will be a prohibition on the selling of single-premium PPI policies, and an obligation to provide an annual review setting out the cost of PPI and including a reminder of the consumer’s right to cancel. Providers will be obliged to provide information to the Office of Fair Trading (OFT) and the Consumer Financial Education Body (CFEB) for monitoring and publication. Additional compliance reporting requirements will come into force, including a commission of independent ‘mystery shopping’ exercises by the largest providers.
Some of the information requirements will come into force on October 1 and the point-of-sale prohibition and other measures on April 6 2012.
Peter Davis, deputy chairman of the Commission and chairman of the PPI inquiry urged providers to mend their ways.
“Insurance to cover periods of unemployment, sickness and following accidents can serve a significant need in our society,” he said.
“The team at the CC has worked hard to document the serious failings of competition in PPI markets and subsequently establish a package of significant market interventions whose aim is substantially to improve the operation of these markets.
“If providers properly seize this opportunity to provide good value insurance products to their consumers then, as a result of these market reforms, we can all look forward to a far better functioning market for this important class of insurance products.”
Complaints about PPI are currently the most common issue received by the Financial Ombudsman Service (FOS) and FSA is contesting a British Bankers Association judicial review into the handling of new complaints on the matter.
The Commission will consult on these proposals before publishing its final verdict in July.