The Mis-selling of Payment Protection Insurance
How to Recoup Mis-sold PPI From Banks and Other Financial Businesses
May 23, 2009
The Competition Commission defined Payment Protection Insurance (PPI) as an insurance intended to provide people with cover for mortgage, credit card and bank loan repayments, in the event of unemployment, sickness, accident or death.
Their report highlighted the following areas of concern:
- Each credit provider faces little competition for the sale of PPI.
- As a result of this lack of competition, it is highly profitable to distribute PPI. The Competition Commission estimated that the 12 largest distributors of PPI made profits in excess of £1.4 billion in 2006 on their combined Gross Written Premium (GWP) of £3.5 billion.
- Many people did not realise that they could buy PPI from other providers and rarely shopped around to compare prices.
- Because there is little competition when selling PPI it appears that people are overcharged for PPI.
Telephone Sales of Payment Protection Insurance
The following month the FSA fined Alliance and Leicester £7 million for: “Serious failings in its telephone sales of Payment Protection Insurance.” Other well-known UK financial institutions have also been fined and others will follow. The FSA has said it would: “Escalate its regulatory intervention, as a result of the poor findings from its recent work on PPI.”
Payment Protection Insurance Mis-selling
Martin Lewis (http://www.moneysavingexpert.com) a well-known UK financial expert offers some excellent advice for those people that feel they have been mis-sold PPI.
He highlights the key mis-selling categories, a few of these are listed below.
- It wasn’t made clear that the insurance was optional.
- It was implied or stated that the loan would be more expensive without the insurance.
- The salesman would not let the application continue without insurance.
- Employment insurance was sold to people who were either self-employed or unemployed.
- Most PPI insurance excludes any existing medical conditions at the time of signing, was that explained?
How to Reclaim Payment Protection Insurance
The first step in what can be a protracted procedure is the write to the bank or financial organisation that sold the PPI. Martin Lewis and others have produced a series of letter templates to help people through the process. It’s almost certain the first response will be a negative one but it’s essential that people persevere.
Write again enclosing a copy of the first letter stating their response is unacceptable and if they are unwilling to settle, a claim will be made to the Financial Ombudsman. The good news for people reclaiming PPI is that over 90 percent of cases that reach the Ombudsman are settled in the consumer’s favour. The Financial Ombudsman Service (http://www.financial-ombudsman.org.uk) has a step-by-step guide of how to complain to a bank, insurance company of finance firm.
The information in this short article is not exhaustive and does not constitute financial advice.
Sources:
UK Financial Ombudsman Service, Payment Protection Insurance
Competition Commission, Market Investigation Into Payment Protection Insurance, (provisional findings June 5, 2008) accessed May 23, 2009
Martin Lewis, PPI Reclaiming Guide, accessed May 23, 2009
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