Banks stop selling loan insurance

Wednesday, January 21, 2009

Five of the UK's largest banks have agreed to stop selling payment protection insurance (PPI) where customers buy it with a single payment.

The banks are the Alliance & Leicester, Barclays, the Co-Operative Bank, Lloyds Banking Group, and RBS Natwest.

The so-called "single premium" PPI has been singled out for criticism by regulators and consumer groups.

Both Which? and Citizens Advice welcomed the move, which applies to PPI sold with unsecured personal loans.

"These premiums are very expensive and can add substantially to the cost of a loan, often increasing people's debts instead of protecting them against hard times," said Citizens Advice.

Louise Hanson, head of campaigns at Which? said: "These firms have recognised that the party is over for single premium PPI and the rest should follow suit."

She added: "PPI has been widely mis-sold in the past so anyone with a personal loan should check if they have a single premium policy as they could claim their money back."

However the Finance and Leasing Association (FLA) defended the general principle of buying PPI, and said it would be wrong to ban it altogether.

"It is important that the Financial Services Authority (FSA) and Competition Commission recognise the need to maintain the provision of PPI, particularly when sold alongside credit offers," said the FLA's director general, Stephen Sklaroff.

Source: News.bbc.co.uk