Barclays is to contest a ruling that will see banks banned from selling highly profitable
payment protection insurance alongside a line of credit.
Research has shown that customers can save thousands of pounds by
shopping around for PPI, a policy which covers repayments should the policyholder become unable to.
However, a Competition Commission investigation found that banks have been pressuring customers into taking out their own extremely expensive PPI along with a loan, credit card or mortgage.
As a result, it ruled that point of sale PPI is anti-competitive and that lenders must wait at least seven days before trying to sell the insurance to a customer.
But Barclays claims the ban on point of sale PPI – due next year – is “unjustified”, and has announced its intention to appeal the decision.
Appeal is hardly a surprise
Cynics (such as myself) will see this as nothing more than an attempt by Barclays to protect its profit margins at the expense of the customer.
Data shows that a bank can earn up to £1,200 from a policy that costs just £20 to offer, so it's not hard to see why they would want first crack at selling PPI to customers.
But the fact remains that customers can save thousands of pounds by shopping around for a PPI policy.
For example, a customer taking out a £10,000, four year, personal loan will have to pay anywhere between £2,000 and £3,000 for a point of sale PPI policy, while
independent PPI providers will cover that same loan for as little as £600.
With this in mind, it will be interesting to see just how Barclays plans to argue that the crackdown on point of sale PPI is unjustified.
PPI is good, sales technique is not
PPI has received a lot of bad publicity in recent years. However, it is important to stress that the product itself is a good one – making sure your debt repayments are covered should you lose your job is a good idea, especially with unemployment soaring.
The reason why it has such a bad name is down to the fact that some lenders charge massively inflated premiums, or simply mis-sell policies to customers who have no chance of making a successful claim.
So if you are in the market for
PPI, make sure you shop around and read the fine print to ensure the policy is right for you.
If you feel you may have been mis-sold a policy, download our
PPI reclaim letter and visit the FOS’
online PPI resource centre for further information.
