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Barclays starts appeal against PPI insurance ban
Mon Sep 7, 2009 1:44pm BST
LONDON (Reuters) - Barclays (BARC.L) has begun a challenge to the competition watchdog's planned ban on the sale of payment protection insurance PPI.L alongside credit cards, loans and mortgages, the bank said on Monday.
Barclays, whose appeal is being supported by rival Lloyds Banking Group (LLOY.L), said in April it would challenge the legality of the Competition Commission's plans to clamp down on PPI, taking its case to the Competition Appeal Tribunal.
PPI has long been a problematic product for consumer bodies, who have argued companies get away with charging high prices because they face little competition. The Competition Commission said last summer that people are being overcharged by 1.4 billion pounds a year in PPI sales.
Barclays plans to oppose the Commission's decision, effective from October next year, to force companies to wait seven days to sell PPI to any customer who takes out a credit agreement.
The vast majority of 12 million PPI policies are sold at the same time as a mortgage, credit card or loan.
"The main area of concern is the point of sale ban which, it is felt, is not justified by the evidence that has been provided," a spokeswoman for the bank said.
"Additionally, the scope of the market definition set by the Competition Commission is being challenged."
Lloyds said in a separate statement on Monday that it believes consumers will be disadvantaged by a ban, warning it "could potentially leave thousands of customers exposed at a time when protection has never been more important".
PPI covers repayments on credit products if the borrower is unable to make payments due to accident, sickness, unemployment or death. Banks say they have seen a significant increase in unemployment claims on PPI policies in recent months. Continued...
Barclays, which does not publish specific revenue and profit data for its PPI products, said PPI is a revenue stream but not a significant one for the group.
The tribunal said the appeal is set to last four days -- with a possible additional fifth day -- though a judgement could take two to three months, with a ruling expected in December.
The Competition Commission has said it is pressing ahead with its PPI plans, pending the outcome of Barclays' appeal.
Barclays' appeal is backed by Lloyds, but also by Shop Direct Group Financial Services, the main provider of retail PPI, a small slice of the market which relates to home shopping.
The banks' challenge will be opposed by the Competition Commission and the Financial Services Authority.
Mon Sep 7, 2009 1:44pm BST
LONDON (Reuters) - Barclays (BARC.L) has begun a challenge to the competition watchdog's planned ban on the sale of payment protection insurance PPI.L alongside credit cards, loans and mortgages, the bank said on Monday.
Barclays, whose appeal is being supported by rival Lloyds Banking Group (LLOY.L), said in April it would challenge the legality of the Competition Commission's plans to clamp down on PPI, taking its case to the Competition Appeal Tribunal.
PPI has long been a problematic product for consumer bodies, who have argued companies get away with charging high prices because they face little competition. The Competition Commission said last summer that people are being overcharged by 1.4 billion pounds a year in PPI sales.
Barclays plans to oppose the Commission's decision, effective from October next year, to force companies to wait seven days to sell PPI to any customer who takes out a credit agreement.
The vast majority of 12 million PPI policies are sold at the same time as a mortgage, credit card or loan.
"The main area of concern is the point of sale ban which, it is felt, is not justified by the evidence that has been provided," a spokeswoman for the bank said.
"Additionally, the scope of the market definition set by the Competition Commission is being challenged."
Lloyds said in a separate statement on Monday that it believes consumers will be disadvantaged by a ban, warning it "could potentially leave thousands of customers exposed at a time when protection has never been more important".
PPI covers repayments on credit products if the borrower is unable to make payments due to accident, sickness, unemployment or death. Banks say they have seen a significant increase in unemployment claims on PPI policies in recent months. Continued...
Barclays, which does not publish specific revenue and profit data for its PPI products, said PPI is a revenue stream but not a significant one for the group.
The tribunal said the appeal is set to last four days -- with a possible additional fifth day -- though a judgement could take two to three months, with a ruling expected in December.
The Competition Commission has said it is pressing ahead with its PPI plans, pending the outcome of Barclays' appeal.
Barclays' appeal is backed by Lloyds, but also by Shop Direct Group Financial Services, the main provider of retail PPI, a small slice of the market which relates to home shopping.
The banks' challenge will be opposed by the Competition Commission and the Financial Services Authority.
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