The Competition Commission has confirmed a total ban on banks selling payment protection insurance to customers at the same time as issuing a loan.
The insurance policies are designed to cover the cost of loan repayments if a borrower becomes unable to repay through specific reasons such as ill health or unemployment. They have previously been controversial because of alleged mis-selling, for example lenders falsely telling borrowers the policy was mandatory.
Under the new rules, a lender must wait until seven days after confirming the loan before it can offer payment protection insurance. The idea is to reduce pressure on the customer at the point of sale and to give them more opportunity to decide whether they need the insurance and, if so, to shop around among other providers.
The rules had been on hold pending a challenge by Barclays which has now failed. Although the change will definitely go ahead, the Competition Commission has yet to decide when it will take effect, though that's likely to be at least one year away.
Although banks have criticised the changes, saying it may deter borrowers from taking out cover they really needed, the commission says any inconvenience to customers is a price worth paying to ensure real competition in the market.