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Banks stop selling under-fire insurance
Banks and other lenders have stopped selling controversial single premium payment protection insurance alongside loans.
City watchdog the Financial Services Authority had called on companies to withdraw the product from sale from yesterday at the latest.
The move follows a damning report into the Payment Protection Insurance (PPI) market by the Competition Commission earlier this year, in which it said it would ban the sale of single premium PPI from October 2010. But in February, the FSA said it had decided to call on all firms to stop selling the product ahead of this deadline due to"ongoing concerns" over the standard of sales.
The FSA's managing director of retail markets, Jon Pain, wrote to chief executives asking them to stop selling single premium PPI with unsecured personal loans as soon as possible and by May 29 at the latest.
PPI covers debt repayments if the holder is unable to work due to an accident or illness or if they lose their job. But unlike regular premium policies, in which premiums are typically paid on a monthly basis, under single premium cover the entire cost of the policy is paid upfront, often being added to the debt being taken out.
This practice leads to people paying considerably more interest on their debt, while in some cases consumers claimed the premiums were added to their loan without them knowing.
An FSA spokesman said: "No firms will be selling single premium PPI on unsecured personal loans from today following FSA intervention and action with the industry."
A number of major banks had already decided to stop selling single premium cover ahead of the commission's report, instead offering the regular premium version of the insurance.
PPI has been the subject of controversy in recent years after consumer groups complained it was being mis-sold to people who would never be able to claim on it.
The FSA has taken action against 20 firms over poor PPI sales practices, including levying a 7m fine on Alliance & Leicester last October for serious failings in its telephone PPI sales.
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Friday 10 February 2012
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