26
Protection news
Competition Commission
Call for realism
Sandy McPherson,
consults on draft order
head of marketing at
Paymentshield, gets back
to reality
A worrying disjoint has opened
The Competition Commission By continuing with the necessary the date on which the personal
up between the real economy
(CC) has published a draft order preparations like this, we can hit the PPI quote is provided to the cus-
and the alternative world
for consultation setting out how ground running once the appeal is
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tomer.
inhabited by investment banks,
measures to introduce competition finalised and we have considered A prohibition on the selling of
hedge funds and others. The
into the Payment Protection the CAT's judgment. If the CAT single-premium PPI policies,
FTSE has been piling on the
Insurance (PPI) market will be supports our findings, taking these whose rebate terms act as a barri-
points and the former masters
implemented. steps now will help ensure there is er to consumers switching while
of the universe are back earning
The measures were outlined no unnecessary delay in resolving the prices of these policies are
stellar bonuses again.
when the CC published its final the significant competition issues unduly difficult to compare with
Back on planet Earth, UK
report into PPI in January this year, that we found in this market and in other PPI policies. Premiums can
government debt in the UK has
concluding that businesses that delivering a better outcome for con- be charged monthly or annually-
risen to a record £799 billion -
offer PPI alongside credit face little sumers. if an annual premium is charged
the highest since records began
or no competition when selling PPI This public consultation is an and the customer decides to ter- in 1974. The average debt for
to their credit customers. opportunity for all PPI providers minate the policy, then a pro-rata households with unsecured
To address the lack of competi- and others with an interest in the rebate must be reimbursed. No loans is now a staggering
tion, the CC announced its inten- effective operation of PPI markets separate charges can be levied on £21,640, excluding mortgages.
tion to introduce a package of to comment on the way in which a customer for administration or So where is the engine for
measures to bring competition in we plan to implement these impor- other costs arising from the set- growth underpinning any
the mar
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ket including: tant measures." up or early termination of a PPI confidence in the UK economy?
A prohibition on the sale of PPI The draft order is available at
Basically there isn’t one. History
during the sale of the credit www.competition- circle6
policy.
A requirement on all PPI
suggests that growth could be
product and for seven days after- commission.org.uk and outlines providers to provide certain
even more elusive than in the
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wards; how the measures detailed below information and messages in PPI
past two recessions. The effects
A prohibition on single-premium w
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ill be implemented. marketing material (including
of a full blown swine flu
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policies; and There will be a prohibition on the price of their PPI, expressed
epidemic sweeping the country
Personal PPI quotes, annual the sale of PPI by a distributor or in a common format of monthly
would destroy any hopes of a
reviews and other measures to intermediary to a customer at the cost per £100 of monthly benefit,
quick return to economic
make sure that improved infor- point of sale of credit and within and that PPI is optional and
growth of even this level.
mation is available to consumers seven days of selling credit to that
The current recession has
to make it easier for them to customer. This will address the circle6
available from other providers).
A requirement on all PPI
seen a sharper fall in growth
compare and search for products point-of-sale advantage, and give providers to provide certain
than previous downturns. This
and switch policies at a later the customer more opportunity information on PPI policies to
has a profound impact on the
point. to compare products and the FSA and a recommendation
wider economy. Experts predict
Although the CC's decision and providers, in turn encouraging to the FSA that it uses this infor-
that it will take nearly five years
proposed measures have since been greater competition between mation for its PPI price compari-
after a recession begins for
appealed to the Competition providers. Whilst the distributor son tables. Providers will also be
unemployment to return to its
Appeal Tribunal (CAT) by Barclays, or intermediary cannot re-con- required to supply information
pre-recession levels. Based on
the CC has started consultation on tact the customer for seven days, to the OFT for the purpose of
the experience of the 1980s and
the detailed implementation of the customers will be able to contact monitoring the remedies package
1990s, a "trend growth" of
changes to enable it to move quick- the distributor or intermediary and to provide information
around 2.5 per cent, is required
and purchase a PPI policy on
before job creation occurs.
ly once the appeal is finalised and it about their claims ratios to any
their own initiative from 24
One of the few to predict the
has considered the CAT's judgment.
credit crunch, Invesco
The appeal hearing takes place from
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hours after the credit sale.
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person on request.
A requirement on all PPI
Perpetual’s Neil Woodford
September 7-10. The CC has Distributors and intermediaries providers to provide an annual
thinks it could take another four
already carried out consumer will be required to provide a ‘per- review for PPI customers, includ-
years to unwind. Rising
research in order to ensure that the sonal PPI quote', which will ing information similar to that
consumer demand is the key to
improved customer information clearly state the cost of the PPI provided in the personal quote,
any sustained recovery. That
contained in PPI quotes and annual policy individually and when to encourage customers to review
means banks lending to
reviews is set out in a clear and easi- added to the credit product. If their policy annually and make it
consumers and businesses.
ly understandable format. this is not given at the point of easier for customers to decide
Unfortunately they seem
Peter Davis, inquiry chairman sale, the credit provider must
preoccupied in shoring up
and CC deputy chairman, said: provide it if they subsequently circle6
whether to switch.
Where distributors of retail PPI
reserves to pay excessive wages
"Whilst we are waiting for the out- contact the customer to offer offer an insurance package con-
and bonuses to the spacemen
come of the appeal, we are pressing PPI. The seven-day prohibition taining PPI and merchandise
that fail to realise that we are
ahead with the detailed work need- period starts from the later of the cover, they must also offer, as a
already living in a new world.
ed to put these measures in place. conclusion of the credit sale or separate item, PPI cover alone.
September 2009 Mortgage Introducer www.mortgageintroducer.com
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