The OFT (Office of Fair Trading) has referred the UK payment
protection insurance (PPI) market to the Competition Commission (CC) for
further investigation. This decision comes after a period of public consultation
following the OFT's earlier proposal to refer the PPI market to the CC on
October 19th 2006.
PPI protects a borrower's ability to maintain repayments on most forms
of personal credit, including mortgages, personal loans and credit card
repayments, should personal circumstances take a turn for the worse, such
as accident, unemployment or sickness.
During the OFT consultation over 20 responses were received from parties
including businesses, consumer organisations and trade associations. Having
considered the views of respondents to the consultation, the OFT says
it's of the view that the competition concerns it identified prior to
the consultation exercise remain valid and that an investigation by the
CC is now warranted.
Three main areas of concern have previously been highlighted: consumers
pay excessive prices for PPI; the protection consumers buy is partial,
with evidence of high pressure and unfair sales tactics; and the administration
of PPI claims can be slow and unfair, leaving consumers facing additional
charges or serious debt enforcement action.
John Fingleton, OFT Chief Executive said: "Our examination of the
evidence presented to date gives us reasonable grounds to suspect that
there are features of this market which restrict competition to the detriment
"Despite some evidence of a degree of consumer satisfaction with
aspects of the product, the evidence as a whole suggests consumers get
a poor deal. This referral will enable the Competition Commission to undertake
a thorough investigation of the market and, if necessary, ensure that
appropriate remedies are put in place."
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