Banks outdo building societies in overcharging for PPI
by Gill Montia
“The selling of payment protection insurance with personal loans has led to excessive premiums and the exploitation of customers.”
The claim is made in a report published by the Economic and Social Research Council (ESRC) Centre for Competition Policy, based on research by the University of East Anglia and Newcastle University.
The study, which used data from Moneyfacts, found that over the period January 1998 to December 2007, lenders cross-subsidised the cost of personal loans by offering over-priced payment protection insurance (PPI).
Banks were the worst offenders, typically charging “significantly more” than mutually owned building societies.
During the ten years covered, the average minimum and maximum monthly cost of PPI stood at £8.27 and £49.58 respectively, indicating that some firms profited far more than others from supplying PPI jointly with personal loans.
Commenting on the findings, Dr John Ashton says: “The de-regulation of financial services and subsequent joint provision of insurance and banking services has had some adverse results for consumers.”
However, regulatory changes are already underway, with the sale of single premium PPI alongside a loan banned in May of this year.
Further restrictions are due to come into force next year, although Barclays is appealing against the new measures.
The bank’s case is currently being heard by the Competition Appeal Tribunal.
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