Lloyds Banking Group’s decision to scrap payment protection insurance across its brands is the beginning of the end for the product, argues consumer organisation Which?.
The bank says regulatory changes make it uneconomic to continue offering the product through its brands which include Lloyds TSB, Halifax,Bank of Scotland, Cheltenham & Gloucester and Black Horse.
Lloyds says it will honour PPI mortgage applications until November 20 and personal credit card and loan applications until July 31.
Peter Vicary-Smith, chief executive of Which?, says the decision is a victory for consumers and he hopes other banks will follow suit.
He says: “This is the beginning of the end for PPI. Banks must go back to the drawing board and offer their customers insurance products that protect them when they need it.”
In the past the secured loans sector has relied on PPI and last week the Finance and Leasing Association reported a 67% drop in the number of secured loans taken out in the past 12 months.
The FLA believes consumers are reluctant to make commitments in the current climate.
Fiona Hoyle, head of consumer finance at the FLA, is urging the Treasury to pause before adding more regulation to the sector.
But Steve Walker, managing director at Promise Solutions, is upbeat. He says an increasing number of brokers are using secured loans because of product improvements.
He says: “Lenders are offering more products at higher LTVs – they are taking more risks with lower rates.”