Ahead of the publication of its review into the PPI sector in April, the CC said in a working paper that the cover was seen as low-risk and highly profitable for providers.
While it was acknowledged that providers of PPI on mortgages and credit cards had been less reliant on income accrued from the product, the CC found that PPI profits on personal loans had helped to keep sector afloat.
The paper said: ‘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. This appears to be a recent phenomenon: the evidence suggests that prior to 2005, the personal loans sector was profitable, even without PPI income.’
Shane Craig managing director of Paymentcare.co.uk, admitted: "We’ve known for a quite some time now that PPI on personal loans has been a major source of income for lenders, but these figures are staggering.
"I commend the CC’s bold move to reveal the truth about lenders’ own loan PPI and hope that the message will filter through to the consumers who have been swindled for so long.
“The game really is up this time for the institutions that have been misusing the concept of PPI. What we need to do now is make sure that the people who want and need PPI know that there is a genuine and affordable alternative from independent providers.”
