Mis-sold PPI

What is Payment Protection Insurance?

Payment protection insurance is one of the latest issues to gain considerable attention from both consumers and consumer watchdogs across the country. Whenever consumers enter into any sort of payment contract, be it a hire purchase style agreement or an insurance that is paid instalments, there is always a concern that the person entering into the agreement will suffer a change of circumstances which renders them unable to make the payments.Payment protection insurance (or PPI) aims to deal with this situation and is an additional payment that is added onto the capital amount of the loan. If the purchaser finds themselves unable to meet the payments due to certain circumstances such as loss of job or illness then the PPI will kick in and make the payments for them.

Where is PPI Sold?

PPI has been sold in a range of circumstances although the most commonly see use of PPI is that attached to loans and lending situations such as mortgages and loans. Any type of regular payment also potentially attracts PPI such as home insurance or car insurance that is paid in instalments.

Instances of PPI have also been seen when individuals are purchasing large items such as cars, computers or electrical goods. These are in essence loans but they can be attached to buy now pay later type scenarios and therefore the cases for reclaiming PPI are often far more remote than they originally appear. PPI should only be sold where the purchaser could potentially make a claim on the insurance. For example if the insurance is aimed at providing support for an individual who loses their job this would not be appropriate for someone who is unemployed.

Regulatory Difficulties for PPI

Recently several of the regulatory bodies have shown an interest in the way in which PPI is sold and put forward to customers. The Financial Services Authority has begun to issue fines to companies who are deemed to be treating customers unfairly. As a result of this the sale of PPI was banned during the first week after a loan or credit card had been sold and also requiring those selling PPI to identify how much of the cost is attributed to PPI and preventing single premiums being used as part of the sales.

The Financial Ombudsman has also dealt with several complaints in relation to PPI and has felt that some lenders have been obstructing their work. It has been estimated by the Ombudsman that around 89% of consumers who attempt to reclaim PPI are successful, a fact that lenders have not been prepared to publicise.

Data has now been released by the Ombudsman relating to individual lenders and the level of reclaimed payments from each lender which has further encouraged individuals to look at loans they have taken out in the past and whether or not they have the right to reclaim these payments.

Further concerns in the lending industry were highlighted when one lady managed to get her entire debt wiped off in September 2009 due to mis-sold PPI.

The Law Behind PPI

The main legislation that deals with PPI and the ability to reclaim is that of the Credit Consumer Act 1974.

Unlock this article now!


For more information on:

  • Reclaiming PPI
  • Time Limits for Reclaiming PPI
  • Pre Court Actions for Reclaiming
  • Factors that suggest you may be able to reclaim PPI: