How has PPI been so widely 'mis-sold'?

While PPI, or Payment Protection Insurance, is not necessarily a bad thing, offering some people protection against the possibility of being unable to repay their debts as they fall due, mis-sold PPI is far more problematic. PPI mis-selling is, essentially, the sale of a PPI loan insurance policy to an individual who should not have been offered one in the first place, or the use of deceptive practices to mislead someone to take out such a policy.

The reasons why PPI may have been mis-sold vary widely, but there are certain common tactics used by financial institutions which have led to a vast number of mis-sold policies.

Firstly, PPI was sold to many people who could not use it. As with any insurance policy, a person needs to meet certain criteria to be eligible for PPI.

For example, since PPI serves as coverage for a potential future loss of income, an individual must have been in full-time, permanent work when they took out the policy – otherwise they would never be able to make a successful claim. Such circumstances are, of course, easy for the insurance broker to check up on or enquire about, but in many cases they chose not to as they wanted the customer to pay extra for the insurance.

Another form of PPI mis-selling involved lenders misleading customers over the purpose of the insurance, or claiming that they needed to take out a policy if they wanted the loan or that it would increase their chances of making a successful application. This is an outright lie, as PPI is simply an insurance policy and has no bearing on whether a loan is approved or not.

Finally, some people had PPI added on to the cost of their loan without being informed about it, or had other sneaky tactics used on them. For example, some lenders would ask if a customer was interested in a “fully-protected loan”, without mentioning that the protection would take the form of a voluntary insurance policy or that there were other options. In these cases, some borrowers ended up completely unaware of the fact that they were paying for an insurance policy – which is obviously another example of mis-selling.

To find out in more detail exactly how you may have been misled over your PPI policy, take a look at the Grounds for PPI Mis-Selling page.