The FSA has praised moves by seven banks to stop selling single premium payment protection insurance (PPI) alongside unsecured personal loans from the end of January.
Alliance & Leicester, which was last year fined £7m for "serious failings" in telephone PPI sales, Barclays, Co-Op Bank, Lloyds Banking Group (including Lloyds TSB, Halifax and the Bank of Scotland) and RBS/Natwest have agreed to offer regular premium policies only.
It follows recommendations from the FSA and the Competition Commission (CC) to cut single-premium sales following a raft of complaints lenders were using aggressive sales techniques to push the product to consumers.
"We are pleased these firms have stopped selling single premium policies and would expect other firms to notice these developments and review their own positions," says FSA managing director of retail markets Jon Pain.
"A PPI product can be helpful for customers wanting protection on a specific credit agreement, as long as the policy is sold appropriately."
PPI has consistently been one of the most complained about areas of insurance with the Financial Ombudsman Service (FOS) and the CC last year recommended culling single premium sales.
But the Association of Finance Brokers (AFB) was among those who argued the move could be to the detriment of consumers.
"At a time when consumer confidence is at an all time low, an increased vulnerability of consumers is evident in this economic climate," it said.
"We urge the CC not to reduce further consumers access to protection products at a time when they are most needed."IFAonline
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