Daily Insurance Industry News
 
 
Daily Insurance Industry News
Wednesday 20th of March 2019
January 17, 2008

Government consumer debt proposals could further thwart PPI market

by Gill Montia

Story link: Government consumer debt proposals could further thwart PPI market

Insurance experts are uneasy about the impact of Government plans to reform personal insolvency legislation on the payment protection insurance (PPI) market.

PPI is sold alongside personal loans and credit cards to covers policyholders’ payments if they have an accident, fall ill or lose their job.

However, the Government has this week outlined proposals that would allow consumers who fall into financial difficulties through a change of circumstance to apply for a court order that would allow them to stop paying their debts for up to one year.

In certain circumstances consumers will be able to apply for an Enforcement Restriction Order (ERO), which would cover personal loans, credit cards and other debts.

While interest would continue to accrue during an ERO all enforcement action by creditors would be stopped during the term of the order.

Debts excluded under the proposed legislation include child maintenance payments, student loan payments, mortgage payments and fines.

Utility bills, rent arrears and council tax may also be excluded.

The Payment Protection sector is already under investigation by the Competition Commission for its low claims ratios, high commission rates, price differentiations and product variations.

Recommendations are due to be issued in the summer by which time difficulties in the economy resulting from the credit squeeze may have led to an increase in redundancy notices.

At this point new levels of mis-selling could be revealed.

 

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