FAQ: Payment Protection Insurance FAQ's
Mis-sold Payment Protection Insurance
Since 2006, complaints over mis-sold payment protection insurance products have continued to rise as banks and lenders have been caught out and made liable to pay a considerable amount in compensation.
The initial complaint was lodged by the Citizens Advice Bureau in 2006 with an investigation being conducted by the Office of Fair Trading and Financial Services Authority in the same year. Since then, a large number of complaints have been made, costing lenders billions of pounds.
This situation demonstrates the wide-spread effects mis-sold PPI has had throughout the UK, as large numbers of claims have been experienced across numerous bodies.
Banks in particular found that a large number of their total complaints were based on mis-sold PPI – around 47% for the Royal Bank of Scotland (RBS) and 31% for NatWest according to 2011 statistics. (See link below)
Of course, to claim for mis-sold PPI you must first review your situation in order to determine your eligibility. Any individual who has taken out a loan or other financial product over the past ten years should review their agreements to check whether payment protection was added to their policy.
If this was done without their knowledge or if the individual received false information on what the insurance covered then they could be entitled to claim. This is also the case if they were told they couldn’t receive credit without taking payment protection insurance – something which is not true.
Who is eligible for PPI?
PPI is designed to cover the repayments of loans and other financial products in the event that the borrower is unable to do so – such as if they are out of work due to unexpected unemployment or sickness.
This means if an individual paid for payment protection insurance cover on a financial product they obtained whilst out of work, for example, then the cover would not be valid.
A large number of people discovered they were entitled to claim for this money,
Average compensation amounts for successful claims are approximately £3,750 per customer. £3750 is the average amount of loan PPI compensation awarded (correct at 31st Dec 2012)
The nature of this situation has led a large number of consumers to lodge complaints – giving the total value of these claims a high figure. According to The Independent, the fall-out is expected to cost the industry £7-8 billion.
Yet not all those entitled to compensation have lodged their claims. In fact, the Financial Ombudsman Service (FOS) expects a further 285,000 new cases to be lodged this year – compared to the 259,000 new cases they received last year.(See link below)
It has never been more important for households to check their eligibility and prevent themselves from missing out on compensation they are entitled to.