FAQ: Payment Protection Insurance FAQ's
How Financial Companies Caused The Payment Protection Insurance Issue
The current issues surrounding the mis-selling of PPI have been around since the Citizen’s Advice Bureau lodged a formal ‘super complaint’ back in 2006. Since the announcement of this complaint and the ensuing investigation which was conducted by the Office of Fair Trading and Financial Services (OFT), press coverage has revealed numerous facts on how the payment protection insurance issue was caused, but what did financial companies have to do with it?
The simple fact is that financial companies were those who mis-sold the policies, meaning that they have been forced to take responsibility. Major banks and other companies were found to be guilty of mis-selling PPI, seeing them issued with numerous fines.
In addition to this, financial companies are also required to pay compensation to the millions of consumers who were wrongly charged. Consumers are able to lodge a formal complaint over the case, claiming for the money which they paid on payment protection insurance when they took out their loan or credit agreement.
Over the affected period (the last ten years or so) many consumers would have taken more than one credit card, loan, mortgage or other financial product. This means that they could have been wrongly charged for PPI on numerous occasions, enabling them to make more than one claim.
In fact, the payments for mis-sold PPI have been so high that in the first ten months of 2011 more than £1billion was paid to those affected. This is in addition to the other sums which were paid in previous and subsequent months/years.
The way in which PPI was mis-sold by these bodies is varied and diverse, meaning a large number of people were affected. In some cases the cover was added to products without the knowledge of the borrower. The product was not always labelled as payment protection insurance on the credit agreement either, meaning that it was not easy for consumers to realise it had been added.
PPI was also sold to some consumers who didn’t qualify for it – such as those in high risk jobs.
Therefore, many consumers were sold a product which they would have been unable to use, a practice which has rightly been condemned as unethical.
In addition to this, some lenders and financial companies actively misinformed their customers about their insurance product. Consumers were either misled over what the policy covered or were given the impression that it was a compulsory part of the loan agreement or product.
As the application process could be confusing and difficult to follow when obtaining a loan or credit card, it is hardly surprising that many people ended up paying for payment protection insurance when they didn’t need or want it.
The financial companies were therefore responsible for the mis-selling, whether actively or passively, leading to them footing the bill for the compensation which is due.