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UK government announces crackdown on payment protection insurance

The UK government has today announced a substantial change in the regulations governing the sale of payment protection insurance (PPI) in relation to loans and credit cards. This area of the market has been relatively untouched for some time despite growing complaints of aggressive sales pitches and some customers feeling they had no choice but to take out PPI with their loan or credit card company. The changes introduced today will have a major impact on the sector which is worth around £4 billion a year.

When the new regulations coming, lenders will not able to sell a payment protection insurance for seven days after the initial loan or credit card arrangement has been signed. Not only will restrain alleged abuses of power, which saw a number of financial institutions automatically assuming customers would take out PPI, but it will also offer customers the chance to buy PPI elsewhere should they so wish.

The problem with payment protection insurance is that it has been sold in such a way as to "scare" many customers into signing-up, when in reality they may not require such protection. Slowly but surely the government is chipping away at many of the old niches of the banking industry which have generated substantial returns over the years.

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