The Competition Commission publishes its final proposals to change payment protection insurance (PPI) sales methods next month after receiving scathing criticism of its draft proposals.

The commission wants a 14-day gap between the sale of a loan to a customer and a PPI to protect it.

It is also proposing a total prohibition on sales of single-premium PPI policies, saying they are a barrier to customers switching providers and make costs difficult to compare. 

Formal responses closed on December 4. 

The National Franchised Dealers Association and the Finance & Leasing Association opposed the commission’s proposed 14-day cooling off period.

Sue Robinson, NFDA director, said: “We urged that this proposal be reconsidered in the interests of dealers and consumers, and in the light of economic conditions.”

Consumer groups have for years said many companies present the PPI option as if it were part of the normal contract, making buyers less likely to shop around.

They say effective and cheaper PPI is available independently.
Robinson said a cooling-off period could make it very difficult for dealers to sell PPI products, and leave consumers unprotected if unable to repay a loan.

“In the current economic climate, where many consumers are concerned about the possibility of redundancy, PPI is a crucial way of ensuring they are able to cover their loan payment,” she said. 

Robinson said that if PPI sales were reduced through the move, finance houses unable to protect customers might seek other ways of protecting their debt. 

“This could be through tighter lending criteria, and higher APR rates, all of which would be to the detriment of the consumer,” she said.

Stephen Sklaroff, FLA director general, called on the commission “at this late stage” to reconsider.

“Preventing customers from buying PPI when they take out new credit will mean that many vulnerable people go unprotected just when unemployment is rising sharply,” he said.

“The loss of single-premium PPI will result in worse terms for many customers. The commission’s proposals will raise the cost of credit, and have ignored the prime minister’s concerns about rising interest rates.”