A ban on the sale of payment protection insurance at the same time as credit cards, loans and mortgages moved a step closer today.
Providers will instead have to wait for seven days before they can contact customers to sell them the insurance after the Competition Commission upheld an earlier ruling it made on plans for a point-of-sale prohibition.
The decision follows an appeal by Barclays, which argued that the proposed ban was not justified by the evidence collected by the Commission and failed to consider the inconvenience that could arise for consumers.
The Commission is also banning the sale of single premium PPI policies, in which the cost for the entire term of the policy is paid upfront and usually added to the debt being taken out.
It is also introducing a package of measures to boost competition in the market, including personal PPI quotes for consumers, annual statements on the cover and better information to make it easier for people to shop around and switch provider.
The Commission was ordered to reassess its plans for a point-of-sale ban after the Competition Appeal Tribunal said the watchdog had failed to take into account the impact the ban would have on consumers.
PPI covers repayments on credit products if the borrower is unable to make repayments due to accident, sickness, unemployment or death.
It is sold to cover a variety of financial products, but more than 90% of PPI sold in the UK relates to unsecured personal loans, credit cards, mortgages or secured loans.
The ban does not cover PPI sold in relation to repayment on shopping through home catalogues.
Inquiry chairman Peter Davis said: "We found that many customers would place very significant value on being given the time and space to choose the right PPI product - or indeed to decide that PPI is not right for them.
"We also found that a significant number of customers appreciate the convenience of buying PPI instantly at the point of sale of credit. Overall we concluded that PPI providers are overstating the loss of convenience that would result from the introduction of a prohibition on selling PPI during the credit sale."
Mr Davis added: "All customers of course will appreciate the lower prices for PPI and the greater choice we expect to result from more competitive PPI markets."
The Commission will now invite comments on its provisional decision before publishing its final verdict in July.
The British Bankers' Association said it was "very disappointed" the Commission had decided to pursue the point-of-sale ban.
A spokesman said: "There is a real danger that this will result in fewer people taking out PPI, leaving them with no protection if they lose their job.
"Payment insurance provides protection and peace of mind to many customers and we will be making the point to the competition authorities as we continue to work with them to make improvements where necessary."
Barclays also said it was disappointed by the Commission's decision.
A spokeswoman said: "We still maintain that to prohibit PPI being sold at the point of credit sale and for a fixed period afterwards will limit rather than enhance customer options and will result in customers being exposed as unprotected."
She added that a quarter of all people who claimed on PPI policies did so in the first 90 days.
Nick Starling, director of general insurance and health at the Association of British Insurers, said: "The ABI will continue to move forward with its members and regulators to ensure the proposed changes in the Competition Commission's Provision Decision Report work to (the) benefit of consumers."
But he added that the group still did not think the ban on selling PPI at the point of sale made sense, as this was the time when people should be looking to take out cover.