Abstract
In January 2009, the UK competition law judgement body, the Competition Commission (hereafter CC), stated that the joint sale of credit or payment protection insurance (hereafter PPI) with lending, including unsecured, mortgage and credit card borrowing, was to be prohibited after 2010. This judgement also required that single premium insurance policies should not be employed in this market, demanded that greater customer information provision be provided, and required PPI to be unbundled from other financial services when sold. Although these measures were legally challenged in October 2009 by Barclays pic on the grounds that prohibiting the sale of credit insurance reduced customer convenience, they were largely upheld in a provisional decision by the Competition Appeal Tribunal, published in May 2010 (CC, 2010).
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Similar content being viewed by others
References
Allen, D. S. and Chan, T. S. (1997). ‘The Efficiency of Residential Mortgage Guarantee Insurance Markets’, The Federal Reserve Bank of St. Louis Working Paper Series, 1997–013A, The Federal Reserve Bank of St. Louis.
Ashton, J. K. and Hudson, R. (2011a). ‘Should the Joint Provision of Credit Insurance with Unsecured Lending be Prohibited? An Examination of the UK Payment Protection Insurance Market’, Bangor Business School Working Paper, No. BBSWP/11/008, Bangor University.
Ashton, J. K. and Hudson, R. (2011b). ‘The Price, Quality and Distribution of Mortgage Payment Protection Insurance: A Hedonic Pricing Approach’, Bangor Business School Working Paper, No. BBSWP/11/010, Bangor University.
Barron, J. M. and Staten, M. E. (1995). ‘Coercion in the Selling of Credit Life Insurance’, Psychology and Marketing, vol. 12, no. 8, pp. 765–787.
BERR (Department for Business, Enterprise and Regulatory Reform) (2007). Tackling Over-Indebtedness. Annual Report, London.
Borenstein, S. (1989). ‘The Economics of Costly Risk Sorting in Competitive Insurance Markets’, International Review of Law and Economics, vol. 9, pp. 25–39.
Burchardt, T. and Hill, J. (1998). ‘From Public to Private: The Case of Mortgage Payment Insurance in Great Britain’, Housing Studies, vol. 13, no. 3, pp. 311–323.
Chiu, W. H. and Kami, E. (1998). ‘Endogenous Adverse Selection and Unemployment Insurance’, The Journal of Political Economy, vol. 106, no. 4, pp. 806–827.
Citizens Advice Bureau (CAB) (2005). Protection Racket. CAB Evidence on the Cost and Effective of Payment Protection Insurance, Citizens Advice Bureau, September.
Commission of the European Communities (2005). Modified Proposal for a Directive of the European Parliament and the Council on Credit Agreements for Consumers Amending Council Directive 93/13/EC, Brussels.
Competition Commission (2007). Market Investigation into Payment Protection Insurance, Emerging Thinking, London.
Competition Commission (2008). Market Investigation into Payment Protection Insurance, Provisional findings report, London.
Competition Commission (2009). Market Investigation into Payment Protection Insurance, London.
Competition Commission (2010). Payment Protection Insurance Market Investigation: Remittal of the Point-of-Sale Prohibition Remedy by the Competition Appeal Tribunal, London.
Consumer Credit Act (2006). Chapter 14. The Stationery Office, London.
De Meza, D., Irlenbusch, B., and Reyniers, D. (2007). ‘Information versus Persuasion: Experimental Evidence on Salesmanship: Mandatory Disclosure and the Purchase of Income and Loan Payment Protection Insurance’, Working Paper, Financial Services Authority, London.
Department for Business, Enterprise and Regulatory Reform (BERR) (2007). Tackling Over-Indebtedness. Annual Report, London.
Department for Environment, Transport and the Regions (2000). Quality and Choice: A Decent Home for All. The Green Paper, HMSO, London.
Department of Trade and Industry (DTI) (2003). Fair, Clear and Competitive. The Consumer Credit Market in the 21st Century, CM 6040, The Stationery Office, London.
Diaz-Serrano, L. (2005). ‘Income Volatility and Residential Mortgage Delinquency across the EU’, Journal of Housing Economics, vol. 14, pp. 153–177.
Durkin, T. A. (2002). ‘Consumers and Credit Disclosures: Credit Cards and Credit Insurance’, Federal Reserve Bulletin, April pp. 201–213.
European Commission (2005). Mortgage Credit in the EU. Green Paper, 327, Brussels.
Federal Reserve Board (2007). 94th Annual Report, Federal Reserve Board, Washington.
Federal Trade Commission (2001). Prepared Statement of the Federal Trade Commission before the California State Assembly Committee on Banking and Finance on Predatory Lending Practices in the Home-Equity Lending Market. Federal Trade Commission, Washington.
Financial Services Authority (2000). ‘Informing Consumers: A Review of Product Information at the Point of Sale’, DP4, The Financial Services Authority Discussion Papers, The Financial Services Authority, London.
Financial Services Authority (2005). The Sale of Payment Protection Insurance-Results of Thematic Work, November, London
Financial Services Authority (2006). Financial Capability in the UK: Establishing a Baseline. The Financial Services Authority London.
Financial Services Authority (2007a). The Sale of Payment Protection Insurance. Thematic Update, September, London.
Financial Services Authority (2007b). ‘The Sale of Payment Protection Insurance — Phase III Mystery Shopping Results’ Consumer Research 61, September, London.
Financial Services Authority (2007c). ‘Insurance Selling and Administration. Feedback on CP07 and Final Rules’, Policy Statement 07/24, December, London.
Financial Services Authority (2008). ‘Consumer Responsibility’, Discussion Paper, 08/5, London.
Financial Services Authority (2010). The Assessment and Redress of Payment Protection Insurance Complaints, Consultation Paper 10/6, London.
Financial Services Authority (2011). Product Intervention, DP 11/1, London.
Ford, J. and England, J. (2000). Data and Literature on Mortgage Interest: State Provision and Private Insurance, Department for Social Security, In-House Report 65, ref. 962–8557.
Ford, J. and Quilgars, D. (2000). Financial Intermediaries and Mortgage Payment Protection Insurance, Joseph Rowntree Foundation, York.
Ford, J. and Quilgars, D. (2001). ‘Failing Home Owners? The Effectiveness of Public and Private Safety-nets’, Housing Studies, vol. 16, no. 2, pp. 147–162.
Ford, J., Quilgars, D., Burrows, R. and Rhoades, D. (2004). Home Owners Risk and Safety-Nets. Mortgage Payment Protection Insurance (MPPI) and Beyond, Office of the Deputy Prime Minister, London.
Grey, J. (2011). ‘Legality of Payment Protection Insurance Compensation Arrangements Examined on Judicial Review’, Journal of Financial Regulation and Compliance, vol. 19, pp. 396–406.
Lacko, J. M. and Pappalardo, J. K. (2007). ‘Improving Consumer Mortgage Disclosures: An Empirical Assessment of Current and Prototype Disclosure Forms’, Department of Economics Staff Report, Federal Trade Commission.
Miles, D. (2005). ‘Incentives Information and Efficiency in the UK Mortgage Market’, The Economic Journal, vol. 115, pp. C82–98.
Office of Fair Trading (OFT) (2006). ‘Payment Protection Insurance’, October, OFT 869, London.
Polden, D. J. (1983). ‘The Antitrust Implications of Credit Insurance Tying Arrangements’, Drake Law Review, vol. 32, pp. 861–912.
Pryce, G. and Keoghan, M. (2002). ‘Theory and Estimation of the Mortgage Payment Protection Insurance Decision’, Scottish Journal of Political Economy, vol. 49, no. 2, pp. 216–234.
Ross, S. L. and Tootell, G. M. B. (2004). ‘Redlining, and the Community Reinvestment Act, and Private Mortgage Insurance’, Journal of Urban Economics, vol. 55, pp. 278–297.
Scanlon, K., Lunde, J. and Whitehead, C. M. E. (2008). ‘Mortgage Product Innovation in Advanced Economies: More Choice, More Risk’, European Journal of Housing Policy, vol. 8, no. 2, pp. 109–131.
Spahr, R. W. and Escolas, E. L. (1986). ‘Mortgage Guaranty Insurance: A Unique Style of Insurance’, Journal of Risk and Insurance, vol. 53, no. 2 pp. 308–319.
Stephens, M. and Quilgars, D. (2008). ‘Sub-prime Mortgage Lending in the UK’, European Journal of Housing Policy, vol. 8, no. 2, pp. 197–215.
Editor information
Editors and Affiliations
Copyright information
© 2013 John K. Ashton and Robert S. Hudson
About this chapter
Cite this chapter
Ashton, J.K., Hudson, R.S. (2013). The Mis-selling of Payments Protection Insurance in Mortgage and Unsecured Lending Markets. In: Monsálvez, J.M.P., de Guevara Radoselovics, J.F. (eds) Modern Bank Behaviour. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/9781137001863_2
Download citation
DOI: https://doi.org/10.1057/9781137001863_2
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-43369-8
Online ISBN: 978-1-137-00186-3
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)