PPI Claims Estimated To Cost Billions
Payment Protection Insurance (PPI) is provided with nearly all credit, loan transactions. Commencing in the mid-1990s, PPI policies were forcible sold as a “fundamental” necessity to any loan transaction that required credit. The intention of lenders was quite simple, profit. By impeling a customer to purchase PPI at inflated rates the loan providers could enlarge their actual profit from a loan by up to a third or more when the term of the loan and insurance plan were complete.
Basically there were two kinds of PPI policies offered, either a “monthly premiums” policy or a “single premium” policy. The latter was particularly insidious. Monthly premium PPI policies are classic insurance policies that provided coverage of the original loan payment when unpaid as a result of circumstances covered by the policy usually including sickness, accident, or unemployment. Premium payments are entirely separate from the actual loan payments, and these policies can be modified (cancelled, increased or decreased) at any time. Although perhaps overpriced, the ability to opt out if desired makes these policies legally “fair.”
Single premium policies are very different. In the case of single premium policies, the payment for the policy actually becomes a part of the total loan. Simply combining the total monthly premiums to be charged over the 3-5 years of insurance cover and adding this amount to the original loan accomplishes this. The additional cost to the creditor and profit to the lender can increase the total cost of the actual loan by a third or more. Unfortunately, these unfair insurance agreements affected many in the UK as major lenders saddled their creditors with Payment protection insurance policies of previously unheard of profits.
Eventually, these unfair business practices and sky-high profits brought relentless pressure from consumer groups like the Citizens Advice Bureau and others. This pressure combined with the attention of the mainstream media forced the government, through the Financial Services Authority (FSA), to ban the practice and in May 2009 the sale of these policies ended. Additionally, people who had certain protection policies could pursue a claim for recovery of their payments and other compensation.
Complaining that the rules being applied retrospectively were unfair, the British Bankers’ Association (BBA) challenged the FSA in high court; however, an April 2011 high court ruling went against BBA. With this ruling an estimated consumer payout of £4.5 billion is now available for compensation to cover past and future awards. Would you like to possibly claim back all your prmiums or, at least, learn if you are eligible to take such legal action?
If yes, certain prescribed steps should be taken to determine your eligibility and, hopefully, receive proper compensation. If you have an active PPI policy or paid for one in the last six years, you may have a valid claim to compensation. A policy purchased over six years ago will require copies of the relevant paperwork.
The Financial Ombudsman Service recommends beginning with a complaint sent to the loan provider and they provide a template letter for complaints and a copy of the “PPI consumer questionnaire” to fill out. If rejected, (FSA reports a rejection rate of about 60%) you should take your complaint to the ombudsman. A final alternative is to use a firm that will evaluate your PPI claims and, if valid, their solicitors will pursue your claim on a no win, no fee basis.