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What will happen now that the PPI market has been opened up?

While the recent government announcement that payment protection insurance cannot be sold for up to seven days after a loan or credit card agreement has been signed has been welcomed by consumer groups, there is concern about who will actually "pay" for this potential loss of business. As with the bank overdraft charge saga it always seems that the customer is made to endure higher charges in due course, no matter what the regulators say.

There are concerns that customers will eventually pay for the loss of PPI business for some financial institutions with higher loan and credit card arrangement fees and interest charges. The fact that the sale of PPI will be open to the mass market will see you around £4 billion of business spread amongst a much larger band of companies. The larger UK financial companies will see a significant drop in their PPI income which will have to be made up in other areas of the business.

In many ways the regulator has been playing a cat and mouse game with the financial sector for some time as charges are transferred and losses of income are regained in other areas of the business. The regulator is most definitely on the side of the consumer but how useful the changes to bank overdraft charges and PPI will be in the long-term remains to be seen.

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