Summary: This article aims to highlight the controversy surrounding payment protection insurance and clarifying why it may have been mis-sold.
Payment protection insurance (PPI) protects the monthly minimum repayment on credit, should an individual find themselves in a position where they can no longer afford to repay it, perhaps as the result of illness, redundancy or other circumstances. In recent years, it has become common for individuals to try to reclaim PPI payments if they feel that it was mis-sold, especially as the current economy has resulted in more people struggling with debt.
Why is PPI so controversial?
Due to the nature of PPI and what it actually covers, it can be very difficult to establish if it is actually suited to the individual who is considering taking it out, for example some pre-existing medical conditions may be excluded. Furthermore, there have been many examples of PPI being sold by the loan/credit provider at the point of sale of the initial credit and the individual has not been given full facts of what the insurance does and does not cover. Advisors have also been known to have broken the rules of the financial services authority (FSA) by ‘recommending’ PPI is taken out. This would be considered an advised sale, and is a big no no when it comes to the sale of insurance, which should be based on facts only (unless a relevant Demands and Needs statement is provided). In worse case scenarios, the individual may not even have been told the PPI had been included in the quote for the credit.
How was PPI Mis-sold?
Below are a few examples of how PPI has been mis-sold in the past
• The PPI was ‘compulsory’ to getting the credit
• Significant exclusions were not advised at the time of purchase (either verbally or in writing)
• Where the length of the loan/credit was longer than the duration of the PPI, it was not made clear that there would be no cover after the PPI ended
• The PPI was added to the loan repayment quote with no explanation
• The individual was unemployed at the time of taking out the PPI (they would have been unable to claim and therefore it was mis-sold)
For further details on PPI and to establish if it was mis-sold, there are many free organisations that can help, including the Citizens Advice Bureau (CAB).