If you have taken out a loan, mortgage, credit card or overdraft from a bank or other lender in the last couple of years, you should be aware that you could have been mis-sold Payment Protection Insurance (PPI) and be entitled to your money back.
The fact that PPI has been potentially incorrectly sold to millions of customers around the UK and that this makes the banks and other lenders liable for £millions has made the issue one of the important consumer issues of the last number of years.
What is PPI?
PPI is supposed to provide cover to bank customers who through an unexpected event, such as unemployment, illness or accident, became unable to meet their regular debt obligations. If one of these unfortunate set of circumstances did befall you, PPI would cover your debt repayments for a period of up to 12 months.
But...?
The problem was that PPI as a product did not always do what it was supposed to. The problems with PPI policies were twofold; there were problems with the product itself and there serious deficiencies in the way the product was sold to customers.
Problems with the product
The first problem with PPI was the fact that it turned out to be pretty useless to the large majority of customers. This was partly a result of the numerous clauses written in to most PPI contracts that had the effect of excluding a wide range of customers. But it was also the result of deliberate actions by the banks; rejection rates for PPI claims were substantially higher than other forms of insurance. The Financial Ombudsman formally complained that they believed that some banks were operating a policy of rejecting 100% of PPI claims.
The second problem was that, despite the uselessness of PPI to many people, the banks were making 80% profits from its sale and the industry as a whole was taking home £5billion every year. PPI charges were often more than the interest on a loan.
Problems with the way it was sold
On top of the problems above was the fact that PPI was mis-sold to millions of customers. The Financial Services claims that the majority of customer with a PPI policy was not told about it when they took out their loan or mortgage. More still were told that the policy was compulsory when in fact it was not.
Another large section of customers were sold PPI even though the exemption clauses in the contract meant that they could never make a successful claim using PPI. If you were unemployed, self-employed, retired, already covered or had certain sorts of health problems when you were sold PPI, you were mis-sold it.
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