Provisional report finds failings in selling payment protection products to shoppers.

The Competition Commission has slated the retail payment protection insurance (PPI) market in a provisional report.

Retail PPI, which covers repayments for shopping from mail-order catalogues, is a small part of the PPI market.

The report concludes that, as with other types of PPI, retail PPI is highly profitable for distributors and there is little competition between providers on price and other factors, limited ability for customers to search for alternatives or switch products and a considerable point-of-sale advantage for the providers.

The commission has also published a notice of possible remedies for retail PPI, inviting views on how best to remedy these problems.

The notice includes most of the remedies consulted on for other types of PPI, as well as a possible requirement to sell retail PPI separately from merchandise cover.

Shane Craig, of PPI provider, said: “The latest findings on retail payment protection insurance is one step closer to the watchdog admitting it can see the elephant in the living room.

“Over the past few weeks we have seen a substantial increase in the number of worried borrowers applying for PPI and, as the financial crisis deepens, there’s likely to be another wave of people scrambling for cover.

“There are a great many borrowers out there who want and need protection, but right now far too many of them are either paying unnecessarily high sums for inappropriate cover or going without. Waiting until next February before the Competition Commission comes to a decision on this issue is not good enough.”

The commission has been investigating PPI for the past 20 months and its inquiry ends next February. It is due to publish a provisional decision on remedies later this week and is expected to impose severe limits on the PPI market.