CC set to go ahead with point-of-sale PPI ban
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The Competition Commission is set to go ahead with a proposed point-of-sale prohibition for payment protection insurance.
All forms of PPI will be included in the ban except for insurance taken out on repayments for shopping through home catalogues.
The point-of-sale prohibition would stop banks selling PPI during the sale of the associated credit product such as a personal loan.
The move was one of a package of measures the CC planned to introduce following its investigation into PPI, which concluded that firms offering PPI alongside credit products face little or no competition.
The report and the proposed point-of-sale prohibition were the subject of a legal challenge last year to the Competition Appeal Tribunal by Barclays, supported by Lloyds Banking Group.
The CAT upheld the CC’s conclusions regarding the lack of competition in the PPI market but ruled that it must further consider whether the prohibition might inconvenience customers.
Since then, the CC says it has analysed the likely effects of a point-of-sale ban. But in its provisional decision, published today, it concludes that greater competition and lower prices as a result of its planned measures will outweigh any disadvantages.
The CC is inviting comments on whether alternative remedies would be more effective or would deliver equivalent benefits at less cost.
The Commission says despite the effects of the economic climate and regulatory action, the underlying problems identified in its January 2009 report remain “firmly in place”.
Inquiry chairman and CC deputy chairman Peter Davis says: “Following the legal challenge, we have done an enormous amount of additional work to examine whether the package of remedies we are proposing will provide an effective and proportionate way of tackling the serious problems that still exist with PPI.
“Overall we concluded that PPI providers are overstating the loss of convenience that would result from the introduction of a prohibition on selling PPI during the credit sale. All customers of course will appreciate the lower prices for PPI and the greater choice we expect to result from more competitive PPI markets.”
“PPI customers currently have little choice and prices are high because competition is very limited. It is notable that even in the depths of the recession following the financial crisis we found that the economic profits of PPI distributors remained significant.”
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