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Barclays challenges legal restrictions on income protection sales

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You may have thought that after wrecking the economy and the mortgage market, and so many banks having to be rescued by the government, that they would have some humility. 

 

But bankers appear to have little or no shame; with the huge bonuses they award themselves being as big as ever.

 

Now, restrictions on the sale of payment protection insurance (PPI) due to come into force next year, are being challenged by Barclays.

 

PPI is often sold alongside unsecured loans to provide cover for repayments if the borrower loses their job or becomes too ill to work. Bank sold covers were often very expensive and provided little or no protection for some of the consumers; with widely reported mis-selling, as people were too scared of losing their mortgage or loan offer to refuse to buy the over-priced insurance.

 

Following a long and detailed Competition Commission enquiry, the sale of single premium PPI alongside a loan was banned in May. Single premium PPI was notoriously costly because the cost of the cover was included in the loan and therefore subject to interest.

 

A ban on the sale of PPI alongside a consumer credit agreement is due to come into force next autumn.

 

Barclays, supported by other banks, is disputing some of the findings of the Commission and challenging the scope of the market definition set by the body.

 

The Competition Appeal Tribunal is hearing the case today and the Commission, which has the backing of the Financial Services Authority, has promised to defend its position vigorously.

 

The chief executive of consumer group Which?, Peter Vicary-Smith, has commented: “Rather than appealing the Competition Commission’s decision, Barclays should concentrate its efforts on developing protection products that offer better cover and value for money to its customers.”

  

Income protection insurance: News update: 18/09/2009

 

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