Comment on the ban on PPI being sold at the time loans are granted

Published:

14/05/2010

Topic:

Press Release

Commenting on the Competition Commission's ban on Payment Protection Insurance (PPI) being sold at the time loans are granted, Tim Moss, head of loans and debt at moneysupermarket.com said;

"There is no doubt that PPI became a 'cash cow' for the banking industry - miss-selling was the inevitable outcome of this and consumers lost out as a result. This has led to the product being tainted in the eyes of many consumers who now try and avoid it completely, when in reality many will need some sort of protection in place should their circumstances change.

"It is good news for consumers that the Competition Commission has looked into this matter and I would hope banks will respond by introducing better products which will truly protect consumers.

"However, following the FSA's decision last year to ban providers from selling single premium PPI on unsecured loans, we suspected lenders would seek other ways of clawing back their profits, and this is exactly what we have seen."

According to analysis by moneysupermarket.com, anyone looking to take out a personal loan will be paying an average of 10.87 per cent APR, a 77 per cent increase since April 2005 when rates were at 6.14 per cent, despite Bank of England base rate falling to a record low of 0.5 per cent.

Tim Moss continues: "The clamp down on the sale of PPI has caused providers to hike up prices on loans to recoup lost revenue, and as a result is has become more expensive to take out a loan - especially those below £7,500.

"However, we need to be careful not to throw the baby out with the bathwater - PPI is a useful product for many consumers giving them peace of mind at a time of financial uncertainty. It is doubtful that consumers will think to take out a stand alone PPI product and they may not understand the product enough to know exactly what they are looking for.

"Consumers should still consider protecting their repayments, and shop around to find the best solution for them, which may be through specialist insurers, rather than from their loan provider."

- Ends -

Accident, Sickness and Unemployment Cover
Male, £160 cover per month (for £5,000 loan over 3 years)
 

Provider	Monthly Premium (40 Year Old)	Excess Period
i:protect insurance	£5.90	30 Days
Columbus direct	£6.61	30 Days
helpucover.co.uk	£8.19	30 Days

Sourced by www.moneysupermarket.com 14.05.2010

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