OFT refers PPI market to Competition Commission

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 of consumers.

"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."

07 February 2007 © Moneyextra.com

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