David Prosser: The end of the £5bn PPI racket
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Your support makes all the difference.Outlook It was once a £5bn-a-year market but payment protection insurance (PPI) looks set to join the list of lucrative products and services – others include unauthorised overdraft fees and self-certificated mortgages – to which the banks are having to say goodbye. Lloyds Banking Group said yesterday that it would no longer sell PPI – which pays out in the event a mortgage or personal loan borrower is unable to stay on top of repayments due to ill-health or redundancy – and other banks look set to follow suit.
Their departure from this market is a triumph for campaigners, including The Independent, who have long argued that banks selling PPI alongside loans and mortgages have often ripped their customers off – at best charging them far too much for the cover and in the worst cases flogging it to borrowers for whom it was plainly unsuitable.
The regulatory authorities took far too long to get to grips with the scandal of PPI but, in the end, the combination of measures announced by the Competition Commission and the Financial Services Authority have made it increasingly difficult for the big lenders to earn a decent return from the product (especially as they are also busy compensating people who have complained to the Financial Ombudsman Service about sales made in the past).
The tale of PPI is a salutary one as we prepare to wave goodbye to the FSA and welcome the Consumer Protection and Markets Agency. In the end, it doesn't matter what you call the body charged with policing the way the financial services industry behaves towards its customers – what's important is how it does the job. When regulators take decisive action, they can get results.
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