Leading article: A victory for bank customers

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The Independent Online

It is nearly eleven months since The Independent first exposed the multibillion-pound profits made by Britain's lending institutions from the selling and mis-selling of Payment Protection Insurance to borrowers.

The insurance was sold as an "add-on" to customers who were often unaware that much cheaper cover was available elsewhere. Some institutions charged premiums without explicitly informing borrowers; others offered guarantees to cover loans in the event of unemployment or illness to the self-employed and to the ill, who would not qualify for help in any event. We described it as nothing less than a "protection racket".

To end these sharp practices, we recommended some simple regulations which would force banks and loan providers to show clearly the costs of any policy, spell out any exclusion and give customers' comparisons with independent providers.

Yesterday, the Competition Commission, observing that banks, mortgage, and credit card providers faced "little or no competition" when offering the insurance to clients, broadly adopted these suggestions.

When the rules are enforced, banks will be prohibited from promoting PPI for 14 days after funds are borrowed, customers must be informed that other insurance is available and banks must provide an annual statement to encourage customers to review their policy provision.

This is no small victory for consumers who have used their collective muscle to demand the repayment of improperly sold policies, at one stage making nearly 500 complaints every week to the Financial Ombudsmen Service. Lenders, meanwhile, have been humiliated: the Financial Services Authority has imposed fines totalling more than £10m.

While this is gratifying, million-pound fines offer a slender disincentive to banks that have made billions, so we welcome rules to curb the lenders' excesses. The credit crisis has ended the era of "light-touch" regulation for the exotic financial arrangements of our large banks, but the PPI scandal shows that the authorities must pay no less attention to what they get up to on the high street. And it is in all of our interests to demand to see the small print.

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