PPI Clampdown hits the mark

If you need any confirmation of the low regard in which banks are now held by MPs just listen to the deafening silence that greeted the Competition Commission's draconian action on payment protection insurance. In any normal climate, there would have been some sharply divided views on the blanket ban on the sale of single premium PPI with new loans and the clampdown on point-of-sale promotion of regular premium policies. Now, there is silence.

It is no good the Association of British Insurers bleating that some people who need this cover may now not bother with it. Its members connived with the banks and building society to miss-sell the product for years so that people paid far too much, often for policies that wouldn't cover them anyway as they might be self-employed or have a pre-existing medical condition.

PPI was, at best, over-sold by the banks. I have sat through meetings between MPs of all parties and the trade unions in the finance sector where the unions complained bitterly that the only way counter staff in banks could meet the targets set for them on the sale of PPI policies was to sell them to people who would never be entitled to make a claim. Insurers must have been as aware of this as the banks, yet they let it go on.

Clearly, the Competition Commission has taken the view that banks and insurers - with 20 years of miss-selling products between them - simply can't be trusted to clean up their own act so they have done it for them. It will cost banks a tidy sum in lost commissions.

This may turn out to be the first of many regulatory clampdowns on financial products as the government and regulators battle to regain public confidence in their ability to control the institutions that are blamed for the financial and economic crisis that now engulfs us. It is essentially a battle for hearts and minds - and a very political battle as the next General Election is now no more than 15 months away -  but it may take us in the direction of an over-regulated industry that finds its scope for innovation gravely restricted as the economy recovers.