What is PPI?
PPI (or payment protection insurance) is a form of insurance that in theory covers your finance repayments on a loan, if you can’t work either through illness, an accident or if you are made redundant. If you have ever taken out finance or bought something on credit it is very likely that the lender or credit provider will have attempted to sell you PPI.
In reality the majority of policies are actually completely ineffective and the Office of Fair Trading has recently found that only 20% of all the monies collected in PPI premiums is paid out as claims. Compare that rate to other insurance policies:
Car insurance pays out 82%
Home insurance pays out 54%
Pet insurance pays out 72%
Medical insurance payes out 80%
So if you have one of these policies you may have spent a lot of money on expensive insurance you’ll be unlikely to claim on.
The Competition Commission, the Office of Fair Trading and the Financial Services Authority (FSA) have expressed concerns and have taken action to try and address the problems of mis-sold PPI.
How to check if you were sold PPI?
If you’re not sure whether you have PPI or not, look at the paperwork sent to you when you took out your loan, specifically your “credit agreement”, this is the document you will have signed to obtain your loan in the first instance.
It is also sometimes included on your repayment statements, and might be listed as
Payment Protection Insurance
Loan Protection Cover
Card Protection Cover
Accident Sickness or Unemployment Cover
Payment Protection Plan
If you can’t find any evidence on your paperwork or you are unsure then you can contact your lender. If they don’t actually sell insurance products, but you believe that you have PPI, ask them to provide details for whoever the underwriter was for their PPI products. You can then contact them directly so you can check whether they have a PPI policy reference number for you.
How big is the problem?
Consumers have been overcharged by £1.4bn on PPI, according to the Competition Commission and many firms have been fined for breaking the rules in the way they sell PPI to customers.
Although there are clear rules that any firm or advisor selling a PPI policy has to follow, mis-selling is still a problem and consumers could be missing out on claiming back money that is rightfully theirs. Research shows that at least two million people may have a PPI policy they would never be able to make a claim on.
In October 2006, the Office of Fair Trading estimated there were approximately 20 million policies in force, with between 6.5 and 7.5 million further policies being sold each year. The profit the industry makes each year from the sale of PPI policies is estimated to be £5 billion.
How has PPI been mis-sold?
- A lot of people believe that having PPI was a condition of their finance deal and that they would be refused finance if they didn’t take it
- PPI is often sold with very specific medical exclusions that would prevent a customer claiming, these exclusions are not explained and often consumers are ineligible without realising it.
- Most PPI policies only last for five years, so if a loan or finance agreement term lasts for longer than this, the consumer will still be paying interest on insurance that has long since expired.
- Certain job types are excluded such as the self-employed, again this is not explained at point of sale and many self-employed people have policies they can’t claim against.
- PPI usually pays out for a limited amount of time, just 12 months. On some credit card PPI, the insurance only covers the minimum monthly payment, meaning the capital balance may never reduce.
- PPI is often single premium insurance which means you pay the whole premium up front in one payment. To make this manageable the lender will add the premium to the loan balance, so a consumer will pay interest on the single premium for the term of the loan.
- The single premium can often be thousands of pounds in its own right.
Don’t just take our word for it…
Competition Commission Findings
In June 2008, the Competition Commission published its findings on the PPI market.
It concluded that ‘companies face little or no competition when selling payment protection insurance to their credit customers, and as a result customers appear to be overcharged.
The FSA has also reviewed the practices and procedures involved in the selling of PPI, as a result several large lenders and brokers have been fined millions of pounds. The FSA’s investigations led them to conclude that many firms are not complying with their TCF (Treat Customers Fairly) guidelines when selling PPI.
Judicial Review
Between 25-28 January 2011, the British Banker’s Association (BBA) went to court with the Financial Services Authority (FSA) and Financial Ombudsman (FOS) over the mis-selling of PPI policies.
On 20 April 2011 a high court judge ruled that the BBA lost their case over complaint handling rules on Payment Protection Insurance (PPI).
On 9 May 2011 the British Bankers’ Association announced that it would no longer appeal the ruling of the high court, meaning that the banks must continue to compensate consumers if they were mis-sold PPI.
Make your claim and get your money back
The lenders and brokers who mis-sold insurance have now been brought to task and must compensate the two million people who have fallen victim to the mis-selling scandal.
At Robin Hood Refunds, we specialise in claims management on behalf of those who innocently paid too much for an inappropriate product.
Simply call 0800 068 8402 and speak to one of our team, or click here to find out how to make a claim.
