Were you mis-sold Payment Protection Insurance?

10-Aug-2010

Following an extensive review of the Payment Protection Insurance (PPI) market several years ago, it came to light that thousands of consumers have been unfairly sold this cover when taking out other financial products such as personal loans, credit cards or store cards.  The Financial Services Authority (FSA), the regulatory body governing the financial services industry, carried out the review.  

As a result of their findings, the FSA took action against 24 firms and individuals for unfair sales practices, resulting in almost 13 million GBP in fines.  Since the investigation, any consumer suspecting that they may have been mis-sold PPI has been urged to seek compensation.  We take a look at Payment Protection Insurance, the FSA's plans for cleaning up the industry, and what you can do if you feel you may have been a victim of mis-selling.

What is Payment Protection Insurance?

Payment protection insurance (PPI) is not in itself a bad or harmful product, and can in fact offer valuable against financial difficulties in the event of unforeseen circumstances.  PPI (also often known as 'loan protection insurance') is designed to help you to meet the repayments on your loan or card should you unexpectedly lose your income through redundancy, illness or injury.  The exact policy details vary from provider to provider, but essentially the insurance would cover the costs of your monthly repayments over a given time period.

If you do decide that you want to take out this type of insurance, you are under no obligation to buy it from your loan or card provider.  Indeed, if you choose to take out your insurance as part of a package with the product itself, it's highly likely that you'll be paying over the odds for it.  Simply look up loan protection insurance or credit card insurance online in order to see how much you could be saving by choosing a separate provider.

In what circumstances might PPI have been mis-sold?

Payment Protection Insurance is deemed to have been mis-sold if:

* You were never eligible to make a claim.  There are a number of exclusions on a typical Payment Protection Insurance policy (for example, preventing claims where the loss of income was caused by a pre-existing medical condition), so you should have been asked the appropriate questions before taking the policy out to determine whether the cover was actually suitable for your circumstances.

* You didn't realise that the cover was optional.

* You didn't realise you were taking out the cover, or were not completely sure what it involved.

* You were not informed that that you would also have to pay interest on the insurance cost, as well as paying interest on the loan or card debt.  You should have also been warned that your PPI policy may expire before the end of the loan term (many PPI policies only last 5 years) but that you'll still need to pay interest on the premium.

What to do if you have been mis-sold PPI

If you have PPI and either did not want it in the first place or do not now feel it is necessary, you should be able to cancel the insurance.  Check the policy document to verify that this is the case.  If you want to make a complaint, you should write to the insurance provider in the first instance and explain to them why you feel that you were unfairly sold the cover.  If your claim is rejected, you can approach the Financial Ombudsman Service (www.financial-ombudsman.org.uk).

The future of PPI

Since the initial review, the FSA has introduced a series of new measures defining how PPI should be sold in the future, laid out in a handbook for financial advisors.  Although these reforms have to be in place by 1 December 2010, the Financial Services Consumer Panel has urged those selling PPI to start adhering to the guidelines as soon as possible, rather than waiting for December.  

Kay Blair, Vice Chairman of the Financial Services Consumer Panel said:  "Consumers deserve to get an early Christmas present from firms and should not have to wait until the new 1 December deadline.  The financial services industry has been dragging its feet over resolving PPI mis-selling and letting down customers by not handling their complaints fairly.   Consumers with rejected PPI complaints should consider taking them to the Financial Ombudsman Service, where 81% of complaints are currently being upheld."