The Competition Commission's (CC's) proposal to ban point-of-sale payment protection insurance (PPI) has been overturned by the Competition Appeal Tribunal.
In its judgment the Tribunal says the CC failed to take into consideration the loss of convenience for the consumer which would have resulted from the ban.
It also said the methodology used by the Commission in quantifying the benefits expected from its remedies package was "defective".
The Tribunal said: "We quash the Commission's decision to impose the point-of-sale prohibition (POSP) as part of its remedies package."
It said the CC should reconsider its judgement but added it may simply reach the same conclusion and include the POSP again.
A CC spokesman says: "The Competition Commission has proposed a package of remedies and the judgment affects one element of that package.
The appeal was upheld on one ground which relates to our assessment of the remedy prohibiting the sale of PPI at the point of sale of credit."
Paul Edmondson of law firm CMS Cameron McKenna adds: "This is a wise decision. The Commission did not take account of the difficulties that the ban would cause for consumers and the undesirable increase in uninsured borrowers which would result.
"The ban may be back of course - but the Commission should consider whether there are better ways to protect consumers."
‘Important to have an anchor’
Report to be written by TPR
Lack of innovation for solutions
Some 2,000 consumers affected