Competition Commission PPI crackdown will put off customers

Plans to ban the sale of payment protection insurance at the same time as loans, credit cards and mortgages will deter customers from buying it, according to research for MoneyExpert.com.

More than two thirds (67 per cent) of adults believe they should be allowed to buy PPI at the same time as taking out a loan, credit card or mortgage. And the independent financial comparison service is warning that PPI should become more important in the year ahead as unemployment rises.

Around one in five adults - around 6.5 million people - say they would be less likely to take out payment protection insurance if Competition Commission proposals to outlaw the sale of the insurance alongside credit go through.

The Competition Commission is proposing that customers can buy from another provider directly after the sale or can buy from the credit provider after 14 days. The Commission estimates that consumers are being overcharged by £1.4 billion a year under current rules.

However research from the independent financial comparison website shows that consumers would be likely to forget or not know where to go for PPI.

The study shows that of those who are less likely to take out PPI 42 per cent would forget if they were unable to buy it at the same as taking out credit. A further 20 per cent said they would not know where to buy PPI. Another 13 per cent said that would not have time to shop around.

Nearly a third of adults believe it is very or fairly important to have PPI in the current economic climate as the threat of unemployment increases.

Sean Gardner, Director of MoneyExpert.com, said: "The Competition Commission deserves support in its attempts to improve the sale of payment protection insurance in the UK but doesn't deserve support if its proposals lead to people missing out on insurance if they need it.

"The likelihood is that too many people who want insurance and who ought to at least have the opportunity to consider it will lose out as a result of the proposal to ban the sale of PPI along with credit.

"The financial services industry has to some extent dug itself into this hole but it is up to the Competition Commission to stop digging. PPI needs cleaning up to some extent but not shutting down."

Just 26 per cent of people with personal loans have payment protection insurance while 37 per cent of those with mortgages are covered. Only 16 per cent of credit card customers are insured, MoneyExpert.com research shows.

It found that the average amounts owed on loans and credit cards are not trivial - the average card customer owes £2,007 while on personal loans it is £9,465.