Last January, following a two-year investigation into the UK PPI
market, the Commission concluded that credit providers and
intermediaries face little or no competition when selling PPI
products to their credit customers.
The report outlined a package of remedies, including a 'point of
sale' ban that will prevent providers selling PPI at the same time
as a loan or credit product, a prohibition on all PPI paid for by a
single premium and new rules to improve the information given to
customers so that they will find it easier to shop around for the
right product.
Under the new regime, customers will receive a personal quote
setting out the cost of the PPI product on its own and when added
to the credit product and an annual review of their policy.
Marketing and advertising material will include the price of the
product in a common format and make it clear that PPI is optional
and available from other providers.
PPI providers also will be required to provide information on
their PPI policies to the Financial Services Authority for
inclusion in the regulator's price comparison tables and to the
Office of Fair Trading (OFT) for monitoring purposes. Large
providers will have to commission an annual, independent mystery
shopping exercise and report the results to the OFT.
In addition, all PPI providers will have to provide information
about their aggregate claims ratios for the previous year to any
person who requests it.
The Competition Commission would like to see these remedies in
force by October 2010. On 8th July it took the first formal step
towards implementation by publishing a draft order for
consultation.
But in March this year, Barclays Bank launched an appeal before
the Competition Appeal Tribunal challenging some of the
Commission's findings – in particular, its decision to introduce
the point of sale ban.
Barclays argues the Commission had no proper evidential basis
for deciding the ban was justified or that it would be a more
effective and proportionate solution than other remedies, such as
an extended cooling-off period.
The appeal, in which Barclays is supported by Lloyds TSB and
Shop Direct Group Financial Services Limited, has been listed for
hearing on 7th September, but the Competition Commission has
decided in the meantime to press ahead with its consultation
exercise.
Peter Davis, Competition Deputy Chairman said:
“By continuing with the necessary preparations like this, we can
hit the ground running once the appeal is finalised and we have
considered the [Competition Appeal Tribunal's] judgment.
"If the CAT supports our findings, taking these steps now will
help ensure there is no unnecessary delay in resolving the
significant competition issues that we found in this market and in
delivering a better outcome for consumers."
PPI providers and other interested parties wishing to comment on
the proposals will have to act quickly. The consultation closes on
7th August.
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