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UK banks fight back over PPI ban

Despite apparently agreeing to recommendations from the Competition Commission earlier this year, Barclays and Lloyds bank are today challenging the blanket ban on PPI (payment protection insurance) being sold alongside a number of financial products. Under the current guidance of the Financial Services Authority (FSA), UK financial companies have until 29 May to withdraw PPI policies from literature and discussions regarding personal loans and until October 2010 to withdraw PPI policy sales from credit card agreements.

Despite significant evidence that PPI policies were mis-sold by a number of financial institutions in the UK, it would appear that the banks are now starting to fight back. Whether this is a repercussion caused by the ongoing battle between the regulators, the government and the UK banking sector remains to be seen but financial institutions in the UK are not going to take this PPI ban lying down. How the government and the regulators will react to this challenge remains to be seen but rocky waters appear to be ahead.

The UK authorities and the UK government cannot afford to do a U-turn on PPI policies and this sets up an intriguing legal battle between the various parties. Who will win and how much it will cost remains to be seen, but in the meantime consumers may well be exposed to potential mis-selling of PPI policies.

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