Banks Challenge Ban On Sale Of PPI

Wed, 06 May 2009

Barclays and Lloyds Banking Group are challenging the ban on the sale of controversial payment protection insurance (PPI), despite agreeing to recommendations made by the Competition Commission earlier this year.

Following its investigation into PPI, which found strong evidence of widespread mis-selling off PPI to UK consumers, the Commission recommended that banks should be banned from selling single-premium policies alongside personal loans and credit cards .

As a result, the Financial Services Authority decided to ban the sale of PPI at the time credit is taken out to encourage people to shop around and stop lenders from forcing customers to take out insurance .

Banks and financial companies in the UK have until 29 May to stop selling single-premium PPI policies alongside personal loans and until October 2010 to withdraw PPI policy sales from credit card agreements.

However, the two banks have now decided to fight back against the FSA’s point-of-sale ban of PPI, which generates lenders around £5.5 billion in revenue each year.

Barclays argues that a ban would not necessarily encourage consumers to shop around and has instead called for borrowers to be given more time to cancel policies.

Peter Vicary-Smith, director general at consumer group Which? said: "It’s outrageous that Lloyds, a taxpayer-backed bank, is challenging the Competition Commission for the right to sell a rip-off product to the very taxpayers who bailed it out."

"PPI has been discredited through numerous investigations and FSA fines. Barclays and Lloyds should focus their energies on developing decent products that offer genuine, affordable protection."
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