Lloyds ceases selling PPI

by Gill Montia

Story link: Lloyds ceases selling PPI

Lloyds Banking Group has ceased offering payment protection insurance (PPI) to borrowers across all its brands, although existing policyholders will not be affected by the decision.

PPI is intended to cover repayments on unsecured loans if the borrower loses their job or becomes too ill to work.

However, the insurance has become notorious for incidents of mis-selling, with consumers sometimes convinced that they would not secure a loan unless they took out their lender’s PPI at uncompetitive rates.

Banks have been under pressure to mend their ways for years and the sale of the notorious single premium PPI (where the premium was wrapped into the loan and therefore liable for interest) has already been outlawed by the Financial Services Authority.

A ban on the sale of the insurance alongside a consumer credit agreement, or for seven days thereafter, is due to be introduced this year but has been delayed by an appeal by Barclays.

Back in 2008, a Competition Commission enquiry into PPI revealed that the large profits made by banks from selling the insurance had been propping up unprofitable lending.

The Commission’s working paper concluded: “The personal loans business has suffered from declining profits in recent years to the point where in 2006, it appears to have been loss making before taking into account income from PPI.”