Banks are to be banned from selling payment protection insurance policies at the same time as offering customers loans, credit cards and mortgages, the Competition Commission ruled today.
They will instead have to wait seven days before approaching customers to sell PPI, which is supposed to cover borrowers' loan repayments if they fall ill, die, or become unemployed, but became highly controversial after thousands were missold to customers who would never be able to claim on it.
The commission first mooted a "point of sale" ban last year, but it was delayed after Barclays and Lloyds won an appeal against it.
PPI generates as much as £5.5 billion a year for British banks.
Barclays argued the regulator failed to fully acknowledge the convenience to consumers who buy the insurance at the same time as a loan.
Today the watchdog said banks were "overstating the loss of convenience" that would result from a ban.
The commission's deputy chairman Peter Davis said: "These reforms will mean that PPI providers will, in future, face real competition where there is currently little, and, in consequence, the prices consumers currently pay for PPI will fall significantly."
