Lloyds Stops Selling PPI

By Julia Kukiewicz Editor 28 July 2010

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Lloyds has made a shock decision to stop selling controversial Payment Protection Insurance (PPI) altogether.

The decision will affect credit cards, loans and mortgages sold at all Lloyds-owned brands.

That includes Halifax, Cheltenham & Gloucester and the Royal Bank of Scotland as well as Lloyds TSB.

Consumer groups have long been fighting against mis-sold PPI. Earlier this year the Financial Ombudsman Service released figures showing that 3 in 10 of the complaints they handled dealt with PPI.

What's more, the FOS found 89% of those cases in favour of the consumer (in other cases the figure is usually around 50%) and commented that many of the remaining 11% were unresolved as a result of incomplete applications.

According to The Guardian, the FOS will announce today that the volume of cases has only increased lately.

In the three months leading up to the end of June, the ombudsman is expected to announce, 149 people a day made an official complaints about PPI on average, up from 135 a day on avergae during the last financial year.

The Competition Commission imposed a ban on selling PPI at the point of sale with other products in May. The Commission had previously been prevented from banning the insurance outright.

Beginning of the end?

Consumer groups will be hoping that the Lloyds announcement marks the beginning of the end for PPI although this announcement won't affect existing PPI policy holders and there are still several years of backlogged mis-selling claims.

Martin Lewis of 'consumer revenge' site MoneySavingExpert said he was "jumping for joy" after hearing the news.

"This insurance has been scandalously mis-sold for years, leaving many consumers in misery. We hope the other big banks follow suit," he said.

How the banks will re-coup their losses from the multi-million pound PPI industry remains to be seen, however.

In a statement Lloyds commented: "This move reflects the uncertainty around the regulation of PPI sales and processes. The group believes further changes in regulation will make it uneconomic to continue to offer these products in their current form.".