- Tuesday, 18 May 2010The payment protection insurance (PPI) ban may cause banks to charge higher interest on their
loans, leading to the need for
debt management plans, warns an expert.
David Kuo, director of the Motley Fool, a financial website, believes that the PPI ban by the Competition Commission (CC) is not necessarily a positive thing.
He warns that banks made money from PPI as they rarely had to pay out and to make up for this loss in revenue, interest rates will climb.
Mr Kuo said: "Ultimately, what's happening to the banks at the moment is that they are finding it increasingly difficult to make money right now. This is just another hurdle that they will have to try and overcome, and the way they do it is by charging people more and paying people less – and that means a higher
loan rate for everyone."
Higher
loan rates could increase the chances of borrowers needing a
debt management plan.
The CC announced that it was prohibiting lenders from selling PPI at the same time they approved a
loan or credit card with the aim of creating competitive prices and encouraging borrowers to look around.
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