Lenders will be banned from selling loan insurance within a week of selling a credit card or loan, it was announced today.
The decision by the Competition Commission (CC) is part of an attemp to hit back at Payment Protection Insurance (PPI) mis-selling.
For years lenders have been selling these policies alongside loans and credit cards, with many customer pushed or even forced into to getting them.
The CC has also said lenders won't be allowed to flog insurance where the premiums are paid up-front.
This strengthens MoneySavingExpert’s Payment Protection Insurance (PPI) reclaiming campaign. So far, over 440,000 free reclaiming template letters have been downloaded from the site. PPI is designed to cover your loan or credit card payments if you cannot work due to an accident, sickness or unemployment.
Anyone who has taken out PPI must now be provided with an annual statement detailing their charges. Firms must also clearly express their PPI cost per £100 of monthly benefit. They must also make it clear that PPI is optional and available elsewhere. All these measures will come into force next year.
The clampdown has been welcomed by campaigners. Martin Lewis, founder of MoneySavingExpert.com, says: “PPI is the biggest mis-selling scam in the country. It wouldn’t surprise me if up to £10 billion worth of mis-sold policies were out there.
“Banks have been flogging hideously expensive, and often pointless, products to consumers for years. They’ve hit consumers over the head with fear-based sales techniques, and so it’s hugely gratifying to hear the CC’s now punching them back even harder.
“The report strengthens the weight of reclaimers. Every day, scores of people report getting back £1,000s. Everyone who’s ever bought one of these policies should check it to see if they’re due their cash back.”
Peter Davis, the CC’s deputy chairman, says: “These measures are designed to address the serious competition problems that currently exist in this market. Leading providers have faced little competition for PPI and, as a result, have charged persistently high prices.”