PPI ban will cost Barclays £160m

Monday, 21 September 2009 03:20

The ban on the sale of payment protection insurance (PPI) will cost Barclays as much as £160 million.

The bank, earlier this month, tried to challenge the Competition Commission ruling that PPI should not be sold at the same time as loans - in a crackdown on a lack of competition in the sale of the insurance that has pushed up premiums.

During the Competition Appeal Tribunal, the minutes of which were released today, revealed how lenders will be hit.

The barrister representing Barclays, Thomas Sharp, explained the initial cost of not selling PPI was £100 million.

Then there would be "£50 to £60 million per year ongoing compliance costs" which Mr Sharpe said would continue "for the foreseeable future".

During the proceeding he also stated the Competition Commission had made a "fundamental mistake" in its remedy to the problem of PPI.

He also hit out at the ban saying it would stop people having PPI cover.

"Denied the possibility of doing [buying PPI] even for 24 hours, but especially for seven days could lead and would lead to a fall in PPI product sales and everyone - everyone - who gave evidence. thought that this remedy, whatever its longer term effects may be, would have short term, and possibly longer term adverse consequences on demand," Mr Sharpe said.

He also criticised the Competition Commission's models that the changes would lead to excess profits from PPI being cut back.

Lloyds Banking was also represented at the hearing, and the two banks instead pushed for price controls on PPI rather than the ban.

The judgement is still pending on the case.

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