The PPI Claims controversy is about to reach its final stages. Banks are paying out compensation for mis sold ppi, but how did the mis selling of PPI begin?
PPI stands for Payment Protection Insurance and was meant to cover debt or loan repayments when unforeseen problems could occur, such as unemployment or a illness.
Also known as credit insurance, it was an additional insurance policy with varying benefits. These were sold as part within a deal when clients took out loans, as well as credit cards, mortgages, car finance or any type of credit.
Some people have also bought these separately. The PPI would cover debt repayments for a specified period of time when the borrower was unable to make their repayments.
Methods Used by the Banks to Mis-Sell PPI
In the event of a person losing their job or other problems that would render a borrower unable to make loan repayments, PPI would exist as an additional loan policy to cover those payments.
Lenders, however, did not properly explain to their customers how PPI worked.
Some banks even told their customers that PPI was compulsory. Others added it without informing their customers.
PPI was in many cases presented like a loan element that simply had to be added to all policies. PPI was in most cases sold alongside a loan, car finance, mortgage and other types of credit.
Moreover, Payment Protection Insurance was presented as being highly beneficial, even though it does not cover certain loans policies and was not right for all everyone.
A History of The Mis-Selling Of PPI
By spring 2008, 20 million PPI policies existed in the UK, with 7 million new PPI agreements being created every subsequent year.
It was estimated that 40% of policy holders were unaware they were paying for PPI.
In April 2001, banks in the UK tried to reject the new rules on selling PPI and against paying out compensation to people who were mis sold PPI. The British Bankers Association launched a judicial review in the High Court against the regulations update of the FSA and FOS.
The BBA’s complaint was that the rules would be retrospective and thus unfair, but it was rejected by the judges.
The banks accepted the new rules and now PPI Claims are now being processed.
How Much Will the Banks Pay Out?
All individuals coming forward with a valid complaint for mis-sold PPI are entitled to compensation.
Some complaints were rejected a couple of years back, but banks were forced to verify those. Additionally, new rules prompt banks to contact even those customers who haven’t complained yet on the matter of PPI.
So far, the Financial Ombudsman Service has received hundreds of thousands of complaints about mis-sold policies. Since 2011, billions of pounds were paid by banks to their scammed customers.
The biggest number of cases were solved in May 2012.
As decided by the High Court, responsible banks will return their customers’ money for mis-sold PPI policies. All complaints will be handled in the proper manner. The expected bill for banks to pay out is said to reach £15 billion.