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OFT refers the PPI market to the Competition Commission

15/07 7 February 2007

The OFT has referred the UK payment protection insurance (PPI) market to the Competition Commission (CC) for further investigation.

Download Payment protection insurance - The OFT's reasons for making a reference to the CC (pdf 255 kb).

This decision comes after a period of public consultation following the OFT's earlier proposal to refer the PPI market to the CC on 19 October 2006.
During the consultation over 20 responses were received from parties including businesses, consumer organisations and trade associations. Having considered the views of respondents to the consultation, the OFT is of the view that the competition concerns it identified prior to the consultation exercise remain valid and that an investigation by the CC is now warranted.

John Fingleton, OFT Chief Executive said:

'Our examination of the evidence presented to date gives us reasonable grounds to suspect that there are features of this market which restrict competition to the detriment of consumers. Despite some evidence of a degree of consumer satisfaction with aspects of the product, the evidence as a whole suggests consumers get a poor deal. This referral will enable the Competition Commission to undertake a thorough investigation of the market and, if necessary, ensure that appropriate remedies are put in place.'

In reaching this decision OFT has taken account of the work which the Financial Services Authority (FSA) is doing to remedy the problems relating to selling standards and to ensure customers are treated fairly, as well as the various industry initiatives which are underway in response to the FSA’s work. However the OFT and FSA agree that FSA action targeted at selling practices alone cannot remedy the lack of competition the OFT has identified in the PPI sector.

The CC investigation is not limited to considering only the issues that the OFT has identified.

NOTES

1. On 13 September 2005 Citizens Advice (CitA) submitted a super-complaint to the OFT about PPI. It was based upon the CitA report 'Protection racket: CAB evidence on the cost and effectiveness of payment protection insurance'. CitA stated that the evidence presented in its report suggested that the features of the PPI market seriously harmed the interests of consumers. Three main areas of concern were highlighted:

• consumers pay excessive prices for PPI
• the protection consumers buy is partial, with evidence of  high pressure and unfair sales tactics
• the administration of PPI claims can be slow and unfair, and can leave consumers facing additional charges or serious debt enforcement action.

2. The OFT response to the super-complaint was given on 8 December 2005 (see press release 226/05).

3. The OFT launched its market study on 4 April 2006 and began its consultation on a proposed reference on 19 October 2006 (see press release 148/06).

4. Store card PPI is excluded from the terms of reference. It has been covered by an earlier CC inquiry with remedies not taking effect until 1 May 2007. Our view is that it would be disproportionate to include store card PPI in the terms of another reference.

5. For more details of FSA work see FSA press release.

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