Ban on uncompetitive insurance overturned
The ban on selling payment protection insurance (PPI) at the point of sale has been put on hold after a challenge by two high street banks.
Earlier this year, the Competition Commission announced an outright ban on banks and building societies selling PPI to borrowers at the same time as a loan. The ban was due to come into force from October next year, but a challenge from Barclays and Lloyds Banking Group means any ban will be pushed back – or possibly scrapped altogether.
The Competition Appeal Tribunal has upheld the banks’ appeal, and ordered the Competition Commission to carry out further investigation into whether a ban is really appropriate – and what impact it will have on consumers.
There have been concerns from industry bodies that this might put many people off buying PPI at all, leaving them unprotected in the future.
The Tribunal agreed, saying the Competition Commission had failed to take into account the “loss of convenience” that would result from a point of sale ban. “In the Tribunal’s view, this constituted a failure to take into account a relevant consideration, and the Tribunal has therefore decided to quash that part of the report that imposes the point of sale ban as part of the proposed remedies package”.
However, the Competition Commission says its conclusion that there is a lack of competition in the PPI marketplace is not under question. And a ban could still be introduced as long as the Tribunal is satisfied that banning PPI at the point of sale will not inconvenience consumers.
Doug Taylor, personal finance campaigns manager at Which?, says the Tribunal decision to overturn the point of sale ban is “disappointing”.
He adds: “Consumers should be able to choose between competing products in order to make informed decisions about how best to protect their finances. Instead, they're faced with a yes/no decision as to whether they want to protect their finances or not."
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.