Watchdog calls for PPI changes now

"The Loans Search...."

The Financial Services Authority (FSA) has urged companies to put a halt to selling single premium payment protection insurance (PPI) with loans.

It has contacted company chief executives of firms that still offer the controversial product and asked them to stop doing so by May 29.

In January the Competition Commission issued a report into the PPI market which said by October next year it would ban firms offering single premium PPI.

Therefore the FSA has decided to write to companies before the deadline asking them to stop offering it because of "ongoing concerns" over sale standards.

The benefit of PPI products is that they cover debt repayments if holders find themselves unable to work.

But unlike regular premium policies, in which premiums are typically paid on a monthly basis, under single premium cover the entire cost of the policy is paid upfront, often being added to the debt that is being taken out.

A number of major banks had already decided to stop selling single premium cover ahead of the Commission's report, instead offering the regular premium version of the insurance.

In the letter to chief executives, the FSA's managing director of retail markets Jon Pain said: "Our focus remains on how this product has been, and continues to be sold and whether consumers have been treated fairly during the sales process.

"We therefore request that if your firm has not already done so, it stops selling single premium PPI with unsecured personal loans as soon as possible and in any event by May 29 2009.

"In view of our ongoing concerns across the single premium market over the standard of sales, we believe this request is justified to bring an orderly withdrawal of single premium PPI from the market."

The FSA has asked firms to provide it with a written response to its request no later than March 31.

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