Financial regulators have stepped up their efforts to end the sale of single premium payment protection insurance (PPI) products alongside unsecured loans, asking all providers to withdraw the products from sale “as soon as possible”.
PPI is sold alongside loans, including credit cards and personal loans, and is aimed at helping customers to meet monthly repayments in the event of redundancy, illness or accident.
But ongoing concerns about mis-selling of the insurance as a single premium – where the cost is rolled into the loan and interest charged on the total amount – has led to regulatory action.
The Competition Commission last month imposed a ban on the sale of single-premium PPI after October 2010.
But the Financial Services Authority has now asked companies selling single-premium PPI policies to withdraw their products – when sold with unsecured loans – by no later than May 29.
“We believe that PPI can play an important and legitimate role to cover repayments on specific credit agreements for consumers facing job loss, or other issues at this difficult time,” said Jon Pain, the FSA’s managing director of retail markets, in a letter to chief executives.
“Our focus remains on how this product has been, and continues to be, sold and whether consumers have been treated fairly during the sales process.”
“We therefore request that if your firm has not already done so, it stops selling single-premium PPI with unsecured personal loans as soon as possible and in any event by May 29 2009.”
The FSA’s move follows the announcement last month by five high street lenders to withdraw single-premium PPI from sale and instead offer customers the chance to make regular payments for the product.
At the time, the FSA said it “expects” other firms selling single-premium PPI to take note of developments with the major lenders.
However, the FSA said in its recent letter to chief executives: “In view of our ongoing concerns across the single premium market over the standard of sales, we believe this request is justified to bring an orderly withdrawal of single premium PPI from the market.”
