Summary: This article summarises the common ways in which payment protection insurance (PPI) may have been mis-sold to consumers.
PPI is an insurance product often offered at the point of sale of credit, such as bank loans, or interest free credit in store. It can also apply to credit cards and even mortgages. It is designed to protect individuals should they find themselves in financial difficulties as a result of illness, or the loss of a job. PPI in itself is not a bad product, as it will cover the minimum repayment of the credit for a specified period; however concerns have been raised as it has been sold to consumers often without checking if it is even suitable.
How can PPI be mis-sold?
• PPI is recommended by the credit lender at the point of sale. As an insurance product, a consumer should not be recommended they take out the insurance as it would be an advised sale.
• The credit lender insinuates that the PPI is compulsory or the loan application will be more likely to succeed if the PPI is taken out. This is simply not true and PPI is never compulsory.
• The policy is not explained. It is important that an individual considering PPI is told of the conditions of the policy such as specific inclusions and/or exclusions that may be relevant.
• The PPI is sold on the basis that it could not be added at a later date. Again, this is not true. PPI can be obtained usually within a certain time frame of credit being agreed, and it does not necessarily have to be from the recommended company.
• The individual is sold PPI when they are unemployed. Clearly, if they are already out of work, they cannot claim for repayments.
• PPI was sold where a pre-existing medical condition means the insurance is not valid.
This list is by no means exhaustive, and there may be other reasons as to why PPI is mis-sold. If an individual feels they have been mis-sold PPI, they should seek independent advice from an organisation such as the Citizens Advice Bureau (CAB). It is also worth noting that, if an individual is in, or considering entering an Individual Voluntary arrangement, and they believe they have been mis-sold PPI in the past, they should discuss with their Insolvency Practitioner (IP) as any PPI compensation will be taken into account when calculating the IVA repayments.