In the last few years the credit card industry has exploded. From humble beginning back in the 1960s suddenly everyone has a credit card, in fact most people have several, and every provider is offering balance transfers and deals and incentives. Many retailers have got on the act too with everyone from department stores to supermarkets offering their own credit card with a host of attractive benefits to entice us into signing up.
Tesco is one of the UK’s biggest brands, with thousands of stores throughout the country it boasts that £1 in every £8 spent in the UK goes into its tills. It is probably unsurprising, therefore, that the company decided to launch its own credit card in a joint venture with The Royal Bank of Scotland. In addition to offering customers Tesco points and Airmiles it also, in line with most other credit card companies, sells Payment Protection Insurance.
Payment Protection Insurance covers a policyholder’s debt repayments if they are unable to work for a period of time due to accident, illness or involuntary unemployment. It is controversial, though, as it is often expensive and it has a very low payout rate.
Payment Protection on credit cards, such as Tesco card, is normally charged at a monthly rate depending on the outstanding balance of the account. The cost is normally applied at a rate of around 79p per £100 outstanding - so, for example, if you owe £4,000 on your credit card you will pay approximately £31.60 per month or £379.20 per year. This rate may increase or decrease monthly depending on your balance and is likely to be considerable more if you have a larger credit card debt.
The cost of credit card PPI is not the only consideration also often represents quite poor value for money due to the low payout rates associated with the cover. A 2008 investigation by The Competition Commission found that just 11% of customers who try and use their credit card payment protection policy are successful in doing so. This means that 89% of claims are rejected. That means, statistically, that as many as 9/10 customers are paying for a credit card PPI policy that they may be unable to use.
The main issue with credit card PPI sold by all lenders, including Tesco, though, is the fact that so many policies have been mis-sold. Mis-selling can occur for a variety of reasons. In order to establish whether you have been mis-sold a policy you should think carefully about the information you were given at the point of sale.
Were you told the cover was compulsory? This statement is incorrect. No PPI is compulsory it is always an optional extra.
Were you told taking out the insurance would improve your chance of being given the credit card? This is also not true. The decision as to where to give you a credit card is based on your credit history and your financial situation.
Were you told you could purchase cover elsewhere? Many people are able to find cheaper cover or cover more suitable for their needs by shopping around. Your lender should have made you aware that there were other alternatives available.
Were the terms and conditions explained to you clearly? In order to decide whether PPI was right for you your lender should have made you fully aware of any terms and conditions associated with the policy. If this did not happen you could make a PPI claim.
Were the costs made clear? Your lender should have clearly explained the cost of the cover and how it would be applied.
In addition, to the above it is possible that your policy may have been mis-sold because your personal circumstances made you unsuitable for this type of cover.
Were you unemployed, retired or in full time education when you were sold the policy? PPI covers repayments as a result of unemployment. If you were not employed you should not have been sold this kind of cover.
Were you over the age of 65? Most PPI policies do not cover people above this age. If you were sold a policy you may be ineligible to ever make a claim.
Did you have a pre-existing medical condition? Most policies don’t cover pre-existing medical conditions. If you were not told this or were, incorrectly, told your condition would be covered you could make a claim.
Did you have PPI cover in place elsewhere? If you already had the cover you should not have been sold another policy.
If you are interested in reclaiming PPI call us today on 0207 471 2000.