CC slammed for tarring MPPI sales with same brush as PPI

The Competition Commission has been slated for banning mortgage payment protection insurance at point-of-sale and putting it in the same camp as general PPI.

The CC’s final report into PPI orders providers and brokers to wait seven days before they contact customers to sell the cover, not 14 as was originally intended.

Consumers wanting to purchase PPI can contact providers after 24 hours.

The CC also confirmed it will ban single premium PPI, a move that was widely expected.

The changes will come into force by April 2010 but Robert Sinclair, a director of the Association of Mortgage Intermediaries, criticises the CC for not recognising the difference in the way the protection product is sold in the mortgage and credit markets.

He says: “We are disappointed that the CC has not recognised the differences that exist between the products and sales processes surrounding intermediated and direct PPI advice and sales.

“The commission should have treated the two channels in different ways.”

He adds: “The introduction of seven-day waiting periods or 24-hour consumer deferments will add cost and complexity to what is already a lengthy sales process.

“Many consumers benefit from this protection and we hope the changes demanded by the CC do not increase the number of vulnerable individuals who will be wholly reliant on state benefits.”

Brokers will also have to supply clients with PPI quotes which state the cost of the PPI policy both individually and when added to the credit product.

If this quote is not given at the point-of-sale the credit provider must provide it if they contact customers to offer PPI.

Peter Davis, inquiry chairman and deputy chairman of the CC, says: “The point-of-sale advantage has meant that leading providers have faced little competition for PPI and have charged persistently high prices.

“Consumers’ interests are not best served when the only choice most consumers have is whether or not to purchase their credit provider’s PPI product.”

But Nick Starling, director of general insurance and health at the Association of British Insurers, says the point-of-sale ban carries significant risk for borrowers by leaving them unprotected at a time when unemployment cover has never been more important.

He adds: “We are concerned that some fundamental risks to borrow-ers have not been addressed by the commission.”