Paymentcare.co.uk welcomes new era in consumer protection for PPI sales as Competition Commission's legislation finally becomes law
• Some new rulings immediately effective as of today
• Single premium policy sales banned
• Point of sale cooling off period welcomed
PAYMENTCARE.CO.UK, a leading independent provider of stand-alone accident, sickness and unemployment (ASU) payment protection insurance (PPI), today welcomes new legislation from the Competitions Commission governing the sales of payment protection insurance (PPI).
From today, a number of the following key rules relating to the sale of this insurance cover take effect. The new rules include:
• a prohibition on selling PPI at the point of sale of the credit until after seven days after the credit sale or, if later, seven days after the supply of a personal PPI quote ('point of sale prohibition');
• an obligation to provide a personal PPI quote, setting out the cost of PPI along with details of the cover provided;
• an obligation to provide information in marketing material about the cost of PPI and 'key messages', for example making it clear that PPI is optional and available from other providers;
• an obligation to provide information to the Office of Fair Trading (OFT) and the Consumer Financial Education Body (CFEB) for monitoring and publication;
• a recommendation to the CFEB that it uses the information provided to it to populate its PPI comparison tables;
• an obligation to provide information about claims ratios to any person on request;
• a prohibition on the selling of single-premium PPI policies;
• an obligation to provide an annual review setting out the cost of PPI and including a reminder of the consumer's right to cancel;
• compliance reporting requirements, including commission of independent 'mystery shopping' exercises by the largest providers.
While the CC's 'Order' takes effect from today, 6 April 2011, the main obligations will be introduced in two phases to coincide with annual government common commencement dates (April 6 and October 1) for new legislation and regulations - and also to allow sufficient implementation time for providers.
Because of this, some of the information requirements will therefore come into force on October 1 2011 and the point-of-sale prohibition and other measures will be effective from April 6 2012.
"This is excellent news for consumers, and the Competition Commission is to be congratulated for sticking to its guns on this often difficult issue," said Paymentcare.co.uk MD Shane Craig.
"This will help to create a far more benign environment for consumers when they are looking for protection in the event of redundancy or being unable to work due to accidents or sickness.
"We particularly welcome the ban on sales of single premium PPI, which has always struck us as being over-priced and designed to maximise benefits for lenders - there are few if any benefits for consumers," said Craig.
The full package of measures was initially outlined in January 2009, when the CC published its final report into PPI, concluding that businesses that offer PPI alongside credit face little or no competition when selling PPI to their credit customers.
"The controversy over point-of-sale activity - typically where banks and other lenders sold uncompetitive products to consumers at the point of taking out loans - means there are fewer options now when it comes to finding good, independent cover. Now with this new legislation, consumers will be properly protected from the point of sale pressure to take out cover, and can focus on getting good value cover to support their loans if they choose," added Craig.
1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.
2. The OFT contact for questions and other matters related to the Order is Natalie Lam (firstname.lastname@example.org). Companies selling PPI are required to let the OFT know about the identity of their compliance officer by 27 April 2011.
3. The members of the PPI remittal Group were Peter Davis (Group Chairman and CC Deputy Chairman), Professor John Baillie, Professor John Cubbin and Malcolm Nicholson. Christopher Bright and Richard Farrant sat on the original Inquiry Group but
1 An exception to this finding was in relation to retail PPI, where the CC decided not to introduce the prohibition. Retail PPI is a small part of the overall PPI market relating to protection taken out on repayments for shopping through home catalogues, typically accounting for about 2.5 per cent of PPI gross written premium paid by customers.
3 For more details on the PPI market investigation please visit: www.competition-commission.org.uk/inquiries/ref2007/ppi/index.htm.