Remember the proposed ban on the sale of PPI alongside loans, credit cards and mortgages to help prevent mis sold PPI from occuring again? Well it’s soon to become a reality as the Competition Commission has pressed ahead with the steps required to install this new piece of financial regulation.

Until recently, the ban had been held up for over 12 months as the result of a legal challenge by Barclays. But after a thorough investigation into the pros and cons of the proposed regultion the commission concluded that, with the exceptoin of retail PPI, the new rules would go ahead. from the regulation. Making up just 2 per cent of the PPI market; retail PPI payments were deemed too small to justify spending time looking for a deal elsewhere.

As is always the way with these things, the commission must now invite comments from the industry before making a final ruling in July.

At the beginning of 2009, the Financial Ombudsman Service (FOS) predicted roughly a 15 to 20% decrease in the amount of complaints being made to it about PPI. They believed that as banks started treating customers fairly and handling customer concerns, so less people would resort to contacting the FOS. They were wrong.

The banks are still failing to handle PPI claims and complaints properly and the latest figures show that in the first 9 months of 2009, the FOS received more complaints than the whole of 2008. In total the FOS will have received around 45,000 complaints by the end of the year, which far from being a decrease, is actually a 45% increase on last year.

At a time when cash is at a premium, it seems rediculous that premiums are taking more of your cash! 2009 has seen the average cost of Payment Protection Insurance (PPI) premiums rise by 35% due to high unemployment rates, increased crime and a need for the banks to make as much money as possible.

The decline of the economy meant that lenders were seeing less money coming in from investments and new mortgage or loan deals. As a result, providers have increased the cost of PPI to cope with the increased number of PPI claims being made. 35% is a massive hike and with no sign of the recession receeding, there could be further increases throughout 2010.

Here’s a bit of a Payment Protection Insurance (PPI) ‘recent history’ lesson:

Back in Jan, the Competition Commission (CC) finished it’s 2 year investigation into PPI and decided that single premium policies (the ones where it’s lumped on upfront) where infair and should be outlawed. By May ‘09 they were.

The CC also established that letting PPI providers sell cover alongside loans meant that they had little competition which in turn leads to higher than necessary prices and less choice. The result: a ban on a lender selling PPI to a customer within 7 days of agreeing a loan.

So, we have two positive outcomes as a result of the PPI investigation and now that hundreds of thousands of consumers have already registered a PPI claim it looks like karma is working it’s magic.

In the next brief history of PPI, I’ll fill you in on the profits and margins that made PPI a favourite with the banks and providers.

Hector Sants is head of the Financial Services Authority (FSA) and he spoke to a delegation at Bloomberg recently about how the FSA have put an end to unfair Payment Protection Insurance (PPI). Sants wrote to a number of providers requesting they stop selling the worst kind of PPI: single premium.

This is the one that’s added on at the start of a borrowing as a lump sum and results in you paying interest on the policy and the loan amount. No wonder then that so many PPI claims have been made for refunds of interest and policy payments.

The thing is, writing to insurance providers in 2009 and is nothing to be proud about, UK banking customers have been mis-sold PPI for many years. In fact Which? the consumer watchdog, raised issues about PPI back in the early 90’s. Hector should’ve got his typewriter out back at the beginning of the last recession.

The Financial Services Authority has made a statement of intent to keep an eye out for any Payment Protection Insurance (PPI) Companies that are looking to shake off liabilities with the help of the phoenix strategy.

Phoenixing is a tactic used by firms that can’t afford to pay back a loan or have been hit with a crippling bill. The Company shuts down and simply re-opens under a different but usually similar name. Speaking at the Mortgage Business Expo in London yesterday, Lesley Titcomb, director of small firms and contact centre said “the FSA was on the look out for this kind of activity… firms are having to reassess past PPI claims they have rejected and this could mean more firms try and become phoenix firms to leave these behind”.

Global financial services company Swiss Re did some research this year on payment protection insurance (PPI) and income protection insurance and their figures show new sales of both are on a sharp decent.

They attribute the decline in sales to three factors:

- The lousy economy
- Employers stopping income protection cover for their employees
- and the terrible image of the insurance after mis-sold PPI policies were revealed

This has resulted, Swiss Re says, in a massive gap between the cover adults currently have and the cover they should have. And when they say massive they mean £190 billion, so yep, that’s massive.

A survey by the Institute of Financial Planning (IFP) backs up what the financial services company have revealed and found that 75% of people admit they would struggle all or some of the time if their circumstances changed for the worse.

It seems every day another slow-head-shake fact comes out about Payment Protection Insurance (PPI) and the way it’s been sold. Today, the Financial Ombudsman (FOS) has accused loan insurance providers of using “vague” clauses to reject claims from policy-holders who have become unemployed in the downturn.

A Providers favourite when it comes to rejecting PPI claims is that the borrower was: “aware of any increase in the risk of unemployment” and didn’t make it known. This is the classic tripe that insurers use to avoid paying out, of course they say it’s to protect them from customers who bought cover knowing that they were about to become unemployed. If that’s the case, there’s about 57.5m Brits right now who are aware they may soon become unemployed, so PPI must be useless (but we already knew this).

Although Payment Protection Insurance (PPI) has been around for a while and is currently (not) enjoying the spotlight, it is still an unknown quantity to many banking consumers. This undoubtedly needs redressing as the very reason why the banks were able to get away with this for so long was the fact that people didn’t know enough about PPI and were paying for inappropriate cover.

Thankfully, the Financial Services Authority (FSA) and the Financial Ombudsman Service (FOS) are doing what they can to educate the British public and there’s no-end of PPI claim Companies popping up on the TV but if you’re still a little unsure as to what PPI is, check out this article at LoveMoney.com that discusses ppi charges, what they are and what to do about them.

Now – we believe in a fair trial, with both sides being heard and yesterday we reported on the fine that the Financial Services Authority (FSA) had slipped under Swinton Insurance’s wiper blade. It was for mis-selling PPI and totalled £770,000 plus Swinton will refund nearly half a million customers. Anyway, they’ve released a statement today and it’s only right that we give them a voice…

“Swinton takes the matter very seriously and will be contacting all customers concerned. The company apologises to any customer affected, and has set up a dedicated unit to deal with the PPI cases.”

It does go on and you can find the rest of it a their website but we though it somewhat reassuring to see an institution coming out and making an honest statement instead of the usual BS.