A payment protection insurance (PPI) plan should ensure that a borrower's loan or mortgage repayments are met should they be unable to work due to accident, sickness or unemployment. However, in practice many policies were sold to borrowers who already had equivalent insurance, or were self-employed and were restricted in their ability to claim. PPI was widely sold on mortgages, personal loans, car loans, secured loans and credit cards.
Furthermore, many borrowers had PPI added to their loan without their knowledge. Others were led to believe ñ falsely ñ that having the insurance would increase their chances of being accepted for the loan, or even that the insurance was compulsory. In many cases PPI was sold as a single premium, where the premium was added to the loan, thus committing the borrower to additional costly interest repayments, as well as making the policies difficult to cancel once in force.
In the last decade, a very large number of PPI policies were taken out by borrowers as banks, other credit providers and credit brokers aggressively sold the product in search of profits. However, some will now be regretting their actions. Major high street banks have set aside very large sums ñ several billion pounds in some cases ñ to pay PPI compensation to customers who should never have been sold it.
The Financial Ombudsman Service (FOS), an independent body set up by the Government that adjudicates on complaints against financial services organisations, has now ruled on over 300,000 PPI-related complaints, of which over 150,000 were received in the 12 months to March 31 2012. PPI complaints accounted for 60% of all cases the FOS dealt with and 85% of their insurance-related complaints. Of the PPI complaints in this 12 month period, 82% were resolved in favour of the complainant.
Claims management companies throughout the UK have already been successful in claiming back mis-sold PPI on behalf of a great many customers, but with an estimated 35 million PPI policies having been sold, there are many more people for whom making a PPI complaint could be well worth their while. Average compensation amounts are around £2,750 per policy, but this amount can sometimes be much higher.
The first step for anyone who thinks they may have been mis-sold PPI is to complain to the vendor who sold them the policy. If they so wish, they can use the assistance of a dedicated claims management company who specialise in this area. The vendor may find in the complainant's favour. However, if the vendor rejects the complaint, or the customer is dissatisfied with the settlement offered, the matter can be referred to the FOS, whose judgements are legally binding on vendors.
Don't assume it's a case of you against a large banking corporation. Even though many well-known financial institutions are extremely reluctant to uphold PPI complaints, the FOS will be on your side if the company did not treat you fairly, or did not comply with its regulatory obligations at the time of the sale.
All information presented in this article is accurate as of February 2013
"I would never have had the knowledge or confidence to claim for PPI from start to finish....They helped me a lot which, in my case, led to a settlement payment of over £80,000. I would urge anyone else in the same situation to get in touch and get the ball rolling.."
Read more testimonials Pamela from Hertfordshire