Loan providers would be making a loss without the add-on sale of highly lucrative payment protection insurance (PPI), the Competition Commission said this week
Loan providers would be making a loss without the add-on sale of highly lucrative payment protection insurance (PPI), the Competition Commission said this week.
In a report that will pile further pressure on the controversial industry, the commission revealed that in 2006, PPI – typically sold by banks and lenders alongside personal loans, mortgages and credit cards – generated an estimated revenue of £2.7bn, with profits peaking at £1.5bn.
The report follows criticism by consumer watchdogs that PPI is misleading, expensive and unnecessary.
The Ministry of Justice has also recently announced proposals to protect indebted consumers who fall into financial difficulty, in a move that could do away with the need for PPI.
The commission found that although the average cost of selling the product could be as low as £20, the average revenue earned by one significant provider at the point of sale of a single premium was as high as £1,200.
Commission rates on PPI sold with credit cards and loans are 50% to 80% and consumers are said to pay almost half the total amount of their personal loans in protection insurance.