Payment Protection Insurance (PPI)

The scandal of Payment Protection Insurance mis-selling

If you have a credit card, a mortgage or any kind of loan, there’s a good chance you were sold Payment Protection Insurance, or PPI, by your broker. Mortgage providers, credit card suppliers and financial institutions of all kinds tend to offer this insurance policy, which is designed to protect you in the event of an unexpected loss of income.

On the surface, this sounds like a good idea. In theory, if misfortune such as serious illness, an accident or job redundancy should affect you - leaving you lacking income and unable to keep up the instalments on your loan - your PPI policy ought to kick in, providing you with the cash to ensure you are able to maintain your repayments.

The downside

Unfortunately, for many people, PPI does not live up to the promises. Payment Protection Insurance is very widely mis-sold by lending institutions, meaning it is marketed to customers who, in a large number of cases, are not eligible to claim on the policy.

If you’ve been sold PPI on a loan, you may want to check the terms and conditions of your policy to establish whether or not it applies to your financial and personal circumstances, and ensure that no mis-selling has taken place. And even if you don’t remember asking for a PPI policy, many borrowers have discovered that they are paying for insurance they didn’t even want - financial institutions are known to have bundled PPI into loans without the customer’s consent, or told them that it is a prerequisite for taking the loan out.

How widespread is PPI mis-selling?

It is estimated that over 70% of PPI is mis-sold, with the Competition Commission calculating that banks and credit card companies are overcharging customers with PPI coverage by a total of £1.4bn a year.

And, in over 90% of PPI complaints, it turns out that the borrower is entitled to a refund of the premiums they’ve already paid, as well as the right to cancel the policy. The average sum reclaimed in mis-sold PPI cases comes to £2000, which, considering it is based on the amount the customer has paid out in unnecessary insurance premiums, demonstrates the extent to which mis-sold PPI can drain your finances.

But how can you tell if you’re one of the victims, and what can be done?

Are you paying for mis-sold PPI?

There are a range of circumstances that may lead to you being ineligible to claim on your PPI policy. Usually, Payment Protection Insurance policies hinge on the borrower being in full-time work without any special circumstances that could foreseeably lead to a future loss of income.

If, at the time of taking out the loan, you were self-employed, unemployed, retired or in part-time or temporary work, or you were suffering from a long-term illness, it’s unlikely you’d ever be able to make a successful claim on the insurance. If you fit into any of the former categories and it turns out your PPI does not cover you, then you should have been informed that the policy was not suitable - and you may be entitled to reclaim your premiums.

A great deal of mis-selling also involves how the policies are promoted to customers. Commission-hungry sales brokers will often mislead the customer over PPI, telling them that they need to take it out to get their loan approved, glossing over it by simply referring to it as part of a "fully protected loan", or even throwing it in without the customer’s say-so.

Lenders are supposed to make it clear that PPI policies are optional and not for everyone, that pre-existing insurance may already cover the loan, and that the customer has the right to shop around, but many skip this part of the process in pursuit of a sale.

What to do next

If you don’t find out from your lending institution whether you have PPI, whether you can use it and whether you want it, you could be throwing thousands of pounds down the drain - look into it now.

If you believe you’ve been mis-sold Payment Protection Insurance and would like to try and claim back your premiums, we can help. You just have to fill out a simple online application form to reclaim mis-sold PPI with our expert advice and assistance.

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