Banks and lenders were fined by the Financial Services Authority (FSA), for mis-selling Payment Premium Insurance (PPI) to them and failing to treat customers fairly. PPI (Payment Premium Insurance) is sold to borrowers in order to protect them from the possibility of not being able to make their monthly payments on credit cards, personal loans, or mortgages. PPI was a significant source of income in the past for banks, financial companies, and retailers. It would have represented 25% to 75% on the total amount of protection policies taken out. This is absurd!
The following banks, financial companies, and retailers have been penalized to date:
Capital One was fined PS175,000HFC Bank (trading under Beneficial Finance & Household Bank).
Alliance& Leicester were fined PS7,000,000 (million).
Liverpool Victoria was penalized PS840,000
Egg Bank was recently fined PS721,000
PS610,000 fine was imposed on GE Capital Bank
Loans.co.uk was penalized PS455,000
Other retailers
The mis-selling of Payment Premium Insurance has led to a whole new industry in reclaim. Anyone with a personal loan or car finance should verify that they have one premium policy. If they do, they can claim their money back. While some companies are ruthless in their sales tactics, others mislead customers into thinking they wouldn’t get their loan or finance if they didn’t have PPI protection.
Many banks and finance companies have sold large, chunky Payment Premium Insurance policies. These policies are usually between PS3,000 and PS4500. They then add to the mortgage, finance, or personal loan agreement. The initial loan amount would be increased by the payment for PPI coverage. This would raise the amount borrowed by a few thousand Pounds. Finally, interest would be charged for the entire loan term. Outrageous!
The Competition Commission wants banks, financial companies, and retailers to cease selling PPI policies within 14 days of the arrangement for finance. The Financial services Authority (FSA), in October 2013, stated that it would intensify its investigation into the mis-selling and abuse of Payment Premium Insurance (PPI). It’s no surprise that Royal Bank of Scotland (Nat West Bank), Barclay, Lloyd Banking Group and Alliance & Leicester have announced plans to cease selling single-block Payment Premium Insurance (PPI with personal loans) by January. FSA hopes other banks will follow their lead and stop selling Payment Premium Insurance (PPI).
Mortgage Payment Protection Insurance (MPPI) is a good option in light of the announcement by banks to pull PPI. In a time of recession, protecting our homes is essential, especially in a world with so many uncertainties. Before we can receive government assistance, we will need to be able to pay our mortgage payments and other bills even if we have been made redundant.
Most of us fear being laid off. We worry about how we will pay our bills and obligations. We also fear the repossession of homes. Mortgage Payment Protection Insurance is a way to help protect your mortgage payments, personal insurance, and building and contents insurance for as long as you are unable to work because of unemployment or disability. These policies can be set up so they pay out 30 days after the date of issue. All mortgage borrowers are encouraged by the Council of Mortgage Lenders to look into independent mortgage payment protection insurance (MPPI) as an option.