Barclays Bank has launched an appeal against limitations that a being placed on the sale of controversial payment protection insurance (PPI) products.

The Competition Commission has proposed that lenders are prevented from directly selling PPI, a form of insurance that is designed to cover a borrower’s debt repayments for one year in the event of redundancy or illness, alongside loans, credit cards and other financial products. Instead, the Commission is recommending that lenders are prevented from selling the product for up to seven days after a loan is granted.

The recommendation comes after a series of complaints of mis-selling against some of the UK’s biggest lenders, with lenders such as Egg, Alliance & Leicester (now part of Santander), GE Capital (who supply credit/store cards for brands including ASDA, Comet, Debenhams and Topshop) and Capital One all being fined by the Financial Services Authority in recent years.

Examples of mis-selling found by the FSA included lenders recommending the product to customers who were not covered by the insurance terms and conditions, such as the self employed as well as finding examples of lenders indicating that the insurance was either compulsory, or a condition of a successful application.

But Barclays, who are supported by the nationalised bank Lloyds and retailer Shop Direct (owner of the Littlewoods catalogue business), have appealed the Competition Commission’s recommendations, claiming that whilst PPI has received significant amounts of negative press, it is still a product that offers important financial protection for consumers.

"Barclays recognises the importance of appropriate financial protection and customer choice and provides a range of products to support customers in this area," said a bank spokeswoman.

"The main area of concern is the point of sale ban which, it is felt, is not justified by the evidence that has been provided," she added.

But consumer group Which? has criticised Barclays’ stance, with chief executive, Peter Vicary-Smith claiming: “PPI has been widely discredited, so it's important that it's sold separately from other financial products to help consumers make informed choices about how best to protect their finances.

"Rather than appealing [against] the Competition Commission's decision, Barclays should concentrate its efforts on developing protection products that offer better cover and value for money to its customers," he added.