Understanding PPI Claims

NathalieM By NathalieM, 22nd Jul 2014 | Follow this author | RSS Feed | Short URL http://nut.bz/1eexqqyg/
Posted in Wikinut>Money>Loans

It seems every other phone call and text message received these days is from some company encouraging us to make a claim against mis-sold payment protection insurance (PPI) and such is the bombardment of communication from these agencies that it can be easy to write the whole concept off as a waste of time. But there are obviously plenty of people out there who have benefited from PPI claims so just what is involved and is it worth the effort?

What is Payment Protection Insurance (PPI)?

Payment protection insurance is an insurance policy often sold with loans or credit cards designed to protect the debtor should circumstances beyond their control, such as ill health or redundancy, prevent them from being able to meet their repayments. Once you meet the criteria to activate the policy (e.g. you’ve lost your job) the monthly credit repayments will be met by the insurance provider for a fixed period (usually 12 months).

On the face of it this is a sensible insurance policy to take out if you’re relying on income from your current employment to repay any money you’ve borrowed. Nobody can guarantee their job will last forever, or that they’ll be fit to perform their duties indefinitely, and so planning for such eventualities where your regular income could ultimately cease seems a prudent choice to make.

So What’s the Problem with Payment Protection Insurance?

By itself payment protection insurance isn’t necessarily a bad thing at all, and as with any insurance policy provided you would genuinely be covered should the worst happen then it makes sense to cover your liabilities. The reason there is such controversy surrounding the world of PPI is that for many years, in the UK at least, it was pushed upon customers who often didn’t even know they were signing up for it, and in many cases their circumstances would have never enabled them to make a claim.

Banks, building societies and other credit providers were routinely using underhand tactics to sneak in payment protection insurance on top of any application for credit that a customer might request. In fact there is evidence to suggest that many of these institutions were purposefully being deceptive in their sale of PPI in the hope that customers wouldn’t notice or would never need to make a claim, which ultimately would have been rejected. The reasons for this are primarily down to the huge profit that PPI would earn the lender. Because the income from payment protection insurance plans would often be greater than that received from interest on the initial loan, sales staff were incentivised to sign as many customers up for PPI as possible.

As is the risk with any high commission product, sales staff seeking as much extra income on their monthly pay packet as they could get, would try everything within their power to make the sale, even if that meant being deceptive. There are reported instances of high profile institutions giving their sales staff deliberately vague scripts to read when signing up customers for credit agreements. They would skirt over the issue of the nature and cost of PPI and in some cases staff would heavily imply that not agreeing to a PPI policy could affect a customer’s chances of having the loan agreed.

Where Are All the PPI Complaints Coming From?

The reason for the explosion in the number of PPI claims in recent years is largely due to the so-called super-complaint lodged against the finance industry by the Citizens Advice Bureau back in 2005 which ultimately prompted the Office for Fair Trading (OFT) and the Competition Commission to investigate the mass mis-selling of payment protection insurance. As the action gathered momentum and received more and more press attention, it became obvious that the scale of this financial mis-selling was greater than most had initially anticipated. What’s more, the claims individuals were filing against the banks and financial institutions that they felt had ripped them off were almost all of them finding in favour of the complainants.

As more and more irresponsible lenders were ordered to pay compensation to their customers, word spread of the ease at which reaching a positive financial settlement from the banks was possible. Suddenly everyone was scouring their old credit card statements for evidence of PPI payments they may have been making unaware and as the payouts got greater and greater, a whole industry sprung up to profit from the failings of the financial firms. In one case a Hertfordshire woman was awarded almost £65,000 from MBNA after she was persuaded to take her complaint to the Financial Ombudsman Service (FOS) and this was far from an isolated example.

Why Are There So Many Firms Keen To Help With PPI Claims?

With the compensation payouts now totalling billions of pounds it was only natural that eager legal professionals would want to take a slice of the huge pie on offer. Banks quickly recognised they’d been found out and had to put aside enormous funds to cover the claims that were due against them. Lloyds Banking Group put aside some £3.6bn, whilst Barclays earmarked £1.3bn for their payouts and Royal Bank of Scotland made a conservative estimate of £950m which they later had to revise to £3.1bn.

With such staggering amounts of money available to the victims of mis-sold PPI, there has been a huge rise in the number of claims management companies (CMCs) who’ve quickly targeted anyone and everyone they can in an effort to cream off some of the money that’s due to them. Because the number of people who’d had PPI mis-sold to them was so high many of these CMCs made no effort to specifically target potential claimants, instead choosing to blanket message or call anyone with a phone number under the assumption that a significant portion would be eligible for the compensation but too busy or not confident enough to process the claim themselves.

Often working on a “no win no fee” basis the myriad claims management companies were falling over themselves to convince unwitting bank customers that they were due substantial sums in compensation, so they could easily profit from the mis-selling scandal, which has made PPI the most complained about financial product in history. And this is why we’re bombarded by telephone calls, text messages and SPAM emails encouraging us to hand over our financial information to various companies keen to extract the compensation that’s rightly due from the lenders.

How To Make a PPI Claim

Whilst you could cave in and respond to one of the companies eager to act in “your interest”, a better bet is to follow the advice of the Financial Ombudsman and conduct the investigation yourself. If you have any suspicions that you have been mis-sold PPI then your first port of call should be your own records. Take a look over your past statements to identify whether payments have been made in the name of PPI, and if they have there’s a good chance your bank or credit card issuer has a case to answer. Therefore you should make contact with them direct. Many providers will have dedicated phone numbers specifically to deal with PPI claims and you should be able to find this information on their websites. Alternatively you can find a list of the contact details for a range of credit issuers on the Financial Ombudsman’s website.

Thanks For Reading my Article on PPI Claims

Thanks for reading. Check out some of my other articles on Wikinut such as Keeping Your Money Safe Abroad and follow me on Twitter too.

Tags

Credit Cards, Finance, Loans, Payment Protection Insurance, Ppi Claims

Meet the author

author avatar NathalieM
Hello! I'm Nathalie and I love writing about what makes my world tick! Fashion, weddings, interior design, health, property..You name it, I will write about it!

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