The Competition Commission (CC)’s move to ban the sale of
payment protection insurance (PPI) at the point of sale has been
successfully challenged – at least in part.
The Competition Appeal Tribunal (CAT) has ruled that the CC must
revisit its decision to impose a ban on selling PPI at the same
time as a credit agreement – known as the point of sale prohibition
(POSP) – as the CC had, in the CAT’s view, not sufficiently
considered the loss of convenience for consumers that the POSP will
cause.
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“[The] input of a convenience detriment into the [CC’s]
modelling could have produced a sufficiently adverse outcome to
lead to a conclusion that a remedies package which included a POSP
did not pass the proportionality test,” said the CAT.
“We therefore quash the Commission’s decision to impose the POSP
as part of its remedies package, and remit that question to the
Commission for reconsideration.
“We have not, of course, concluded that the Commission could not
by that process lawfully decide to include the POSP as the result
of that reconsideration,” it added.
The ban was appealed by Barclays Bank, with support from Lloyds
Banking Group and Shop Direct Group Financial Services. The CC,
meanwhile, was supported by the Financial Services Authority.
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By GlobalDataThe judgement said: “Opponents of the POSP argued during the
investigation that, since the convenience of being able to purchase
PPI insurance at the same time as the credit being insured was a
major attraction to consumers which contributed to the level of PPI
sales, the inconvenience to consumers arising from being unable to
do so after the imposition of the POSP would lead to a reduced
take-up of PPI, to the serious detriment of the PPI market.”
The CC responded that the CAT had not questioned its finding
that the PPI market lacked competition, and noted that the
judgement did not necessarily mean that the POSP would be
overturned – merely that “the CC 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.”
The news means that motor retailers may yet retain the ability
to sell PPI alongside PoS finance – a potentially valuable source
of commission to dealers, in a time of falling margins on car
sales.
