UK Money News
30th January 2008
Lenders profiting hugely from payment protection insurance
Lenders are making large profits from payment protection insurance policies (PPI), according to a report from competition authorities.
The Competition Commission made the claims in a report into the policies, which are sold by providers as a means of protection against a loss of income.
The report found that the average cost of selling such can be as little as £20, but that the lender can earn up to £1,200 from each sale.
This equates to a profit of 982 per cent on the policies, from which banks make as much as £2.6 billion a year.
The report stated: "The personal loans business has suffered from declining profits in recent years to the point where in 2006 it appears to have been loss making before taking into account income from PPI.
"With PPI included, the sector appeared to have been marginally profitable."
News of the study comes as a separate report from the Post Office showed that PPI linked to a loan is five times more expensive than policies purchased separately.
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