Lenders told to stop selling single premium PPI right away
June 23, 2009
It was recently reported that regulators had brought in a ban on the sale of single premium Payment Protection Insurance from lenders, with the ban officially coming into force in October of next year.
However, although the ban is not set to start officially until October 2010 lenders are being told to stop selling this controversial form of protective cover right away, with authorities citing ongoing concerns over this type of insurance cover as the reason for wanting sales of it stopped right away.
The Financial Services Authority, which is the UK’s financial regulator, has stated that lenders need to stop selling single premium PPI now rather than waiting for the official bank to kick in.
There are currently around twelve million PPI policies in force, and these have been sold alongside financial products such as credit cards, loans, and mortgages. The purpose of PPI is to protect borrowers who are unable to meet repayments for a period of time due to sickness, injury, or redundancy.
An official from the FSA has written to chief executives stating that they need to stop selling PPI cover as soon as possible. The deadline for stopping the sale was outlined at 29th May in the letter, which means that lenders should now have stopped selling single premium PPI.
The controversy over this type of cover related to the fact that it was added to the finance as a lump sum, leaving borrowers to pay interest on the insurance as well as on their borrowing.
On 29th May, the date of the deadline for stopping the sale of this type of cover, an official from the FSA said: “No firms will be selling single premium PPI on unsecured personal loans from today following FSA intervention and action with the industry.”
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