Plans to restrict the sale of the controversial payment protection insurance (PPI) have suffered a setback.

The Competition Appeal Tribunal has ordered the Competition Commission to reconsider whether a proposed ban on selling PPI alongside personal loans was appropriate.

The appeal against this restriction was made by Barclays bank, which argues that the proposed restriction on the sale of PPI limits customer choice.

PPI is designed to help cover the cost of bills and loan repayments in the event that you fall ill or are made redundant. The ban on its being sold in conjunction with the issue of a personal loan follows a two-year investigation into complaints over the high price and numerous exclusion clauses in the sale of PPI, which often aren’t properly clarified to the customer.

The Competition Commission said that it would study the appeal “closely”, but pointed out that if successful, it would affect just one part of its plan.

“The appeal was upheld on one ground which relates to our assessment of the remedy prohibiting the sale of PPI at the point of sale of credit,” said the Competition Commission.

“The Commission has been asked to reconsider the loss of convenience for consumers of not being able to buy PPI at the same time as taking out credit.”

In January the Competition Commission announced a raft of restrictions on the sale of PPI. It ruled that from October 2010 lenders would not be allowed to sell the insurance at the same time as granting a loan, or for seven days afterwards.

Peter Davis, deputy chairman of the commission said that this “point of sale” advantage meant that lenders faced little competition over the sale of PPI and “as a result, have charged persistently high prices.

PPI was the single most complained about financial product in the first half of the year, the Financial Ombudsman said earlier this month.

This entry was posted on Friday, October 16th, 2009 at 3:57 pm and is filed under Insurance, Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.