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PPI Set To Be Banned

The financial world has suffered heavy losses over the last few years as we all know through the global economic downturn. And just as the UK banks thought it couldn’t get much worse, thousands upon thousands of the UK population started to get wise about a new scandal, commonly known as Payment Protection insurance (PPI).

Payment protection is insurance designed to cover the cost of any loan you may have taken out in the event you cannot make the repayments, due to illness or injury. The idea in itself is a good one, as if you fall ill and cannot work then for example you are safe in the knowledge your mortgage would be paid by the PPI you have.

The problem with PPI is that the majority of people ‘sold’ PPI where never actually told they were being sold it. And if they were told, they were miss-lead into thinking it was something different. So, thousands of the UK population where forking out money for an insurance package that they either did not need, they did not want or ask for, or an insurance package that was of no use to them and would never pay out in the event of a claim.

This type of insurance has become a lucrative one for the banks. Estimations show that PPI generates 4 billion pounds per annum for financial institutions. However, we now have a situation where thousands of people are paying their cash into a scheme that is of no use to them whatsoever.

Well it all looks to be over for the banks. On top of the millions of PPI customers claiming back money they have unnecessarily paid out (to the tune of 177 million in the first 11 months of 2009), the Competition Commission has recently stated that it will ban the sale of PPI alongside the sale of financial products such as loans, credit cards and mortgages.

This decision means that the banks will no longer be able to sell this highly controversial insurance product at the time they decide to borrow, or during a fixed term after they have taken out the loan.