FAQ: Payment Protection Insurance FAQ's
Mis-sold Credit Card Payment Protection Insurance
Individuals who took out a financial product or loan over the past decade may find that they were wrongly charged for PPI. This insurance was added to a number of policies without the borrower’s knowledge or after giving the individual misleading information – leaving many people with a right to claim compensation.
The mis-selling of PPI, whilst commonly associated with large value loans and other major products, was not restricted to these products. Credit cards can also come with payment protection insurance and individuals who took out any credit card agreements over the past ten years could also be entitled to claim.
How was PPI mis-sold?
PPI was mis-sold in a number of ways. Some individuals had the insurance added to their agreements without their knowledge or were made to believe it was mandatory where credit was to be given.
A large number of people were also unaware of the exclusions which applied to the product, meaning they were paying for a financial product which they couldn’t actually use.
How does it affect credit cards?
Credit cards are a loan agreement and can therefore be covered by PPI. Regular monthly repayments are needed for credit cards with any late payments resulting in additional charges being incurred.
Credit cards are often labelled as a cause of debt for this reason and this means a large number of people would have been eager to protect the repayments with insurance products such as payment protection insurance.
This would have incurred an additional monthly fee on top of the charges already made by the customer.
Whilst a payment protection policy is a legitimate product used to safeguard repayments, some lenders took advantage of borrowers by mis-selling them the policy.
This means many customers were being falsely charged for the policy. As PPI is paid through a monthly fee the total amount taken from lenders could be quite high.
If payment protection insurance was added without the knowledge of the customer or if the individual was misled over their entitlement to the product then it was mis-sold and they could be entitled to claim.
Claiming for mis-sold credit card PPI offers consumers the chance to seek compensation for this. Successful claims can result in a compensatory payment for those affected, allowing them to reclaim the money they were wrongly charged.
PPI claims to date
The total value of all payment protection insurance claim payouts is estimated at £7-8 billion and more claims are expected to be lodged over coming years, with the Financial Ombudsman Service (FOS), which often has claims referred to them, expecting to take on 285,000 new cases during 2012 alone.