Recent reports indicate that Lloyds Banking Group is challenging the ban on the sale of payment protection insurance. This was introduced to protect millions upon millions of borrowers. A subsequent appeal could delay a ban against the sale of PPI along with credit agreements.
The competition watchdog also stated that lenders should wait at most two weeks before selling PPI. This can be considered further ammunition for consumers who may believe they were mis-sold PPI policies.
What’s Payment Protection Insurance or PPI?
You may not know what PPI is. However, with the estimated 20,000,000 policies in the UK, it is possible that you have a policy that you don’t even realize you have. The latest statistics show that as many as 2,000,000 policies were mis-sold. This is evident in the proposed changes to sales processes, which are sometimes not conducive for a fair sale.
The policy, also known as Payment Protection Insurance, is a general product that was sold alongside mortgages, loans and store cards. It is designed to cover repayments in the event of unforeseen circumstances. A PPI policy will pay the required payments if you are unable or unable to work due to illness or an accident.
You’re right, it sounds amazing! But what’s the catch?
Although the policies are useful in principle, PPI policies purchased directly from a lender can often be very poor value for money. PPI policies are often sold directly to individuals who won’t be able or able to file a claim. These policies have very strict terms and conditions. Recent research shows that only one fifth of claims are successful. Every policy will contain specific terms and conditions. However, recent research has shown that policies won’t pay if consumers are retired or self-employed. Another common exclusion is claims due to back or stress.
Recent evidence has shown that lenders are pushing customers into policies. In some cases, lenders falsely claim it is compulsory to get credit. Others refuse to provide a quote without PPI. Many other cases have shown that PPI was added to customers without their consent.
Some examples of PPI include paying upfront for the policy and adding the cost to the finance you take out. This is often called a’single-premium’. It means you will pay interest on the insurance cost. Customers who attempt to cancel their insurance policies are often told that they cannot without the whole loan being recalculated.
This is not good. So what can we do?
The Financial Services Authority, which regulates the Financial Services Marketplace, has been intensifying its enforcement against those firms that have mis-sold PPI. Furthermore the Competition Commission has advised that PPI not be sold simultaneously with credit products. Although the financial institutions are currently appealing the decision, it seems likely that they will lose. This could lead to a significant change in the way these policies are sold and reduce some of the unethical practices in the PPI market.
Can I reclaim any PPI policy?
The date you purchased the insurance is what will determine whether you are entitled to compensation. In January 2005, the FSA took over the sales of General Insurance Products of which PPI is one. The latest rules would not cover sales made before this date. However, there is an opinion that you should still complain to your lender if it seems you were mis-sold. Although your policy was purchased before Jan 2005, there were regulations regarding the sale of PPI. However, these were probably less strict and well-observed. These complaints may be considered by the Financial Ombudsman Service. Your claim should be considered if the date of inception of the policy was not before January 2005.