The Competition Commission today announced that banks will no longer be able to sell Payment Protection Insurance (PPI) when they grant a loan.
The insurance, which cost consumers £4bn in 2007 alone, supposedly protects borrowers in the event that they become unable to work or lose their jobs. However, there have been frequent allegations that the product has been missold by lenders, many of which have been upheld.
The Commission said that lenders have an unfair "point-of-sale advantage" when they sell insurance with a loan, stating that this restricts competition, drives up prices, and frequently leaves consumers with an inferior product.
The Commission"s report will suggest a 7-day "cooling off period" after the granting of a loan, during which the lender will not be permitted to sell insurance. Insurers say this is dangerous; Nick Starling of the Association of British Insurers told the BBC any such ban "carries significant risks for borrowers, mainly by leaving them unprotected at a time when unemployment cover has never been needed more."
