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Capital One payment protection

In 2007 Capital One become one of the major lenders to be handed a fine by the Financial Services Authority (FSA) regarding its part in the payment protection insurance scandal. Payment protection, often known as loan protection insurance or PPI, is a insurance that offers to cover the policyholder’s debt repayment if they are unable to work due to involuntary unemployment. The cover can provide a good level of protection, but not everyone needs or wants it and not everyone can be provided with the cover. The issue of mis-selling arose when it was discovered that many customers may have been sold an inappropriate policy.

The FSA’s investigation revealed that 50,000 customers who purchased Capital One payment protection between January 2005 and April 2006 had not been issued with important information regarding the cover. Most loan insurance and payment protection policies, like all other forms of insurance, have a high number of exemptions. These are things that are not covered by the policy. It is vital that these policy documents are issued so that the customer is aware of the conditions and terms of their policy.

The FSA’s investigation into Capital One payment protection sales was part of a wider investigation into the sale of PPI across the financial world. Throughout their investigations, the FSA found many failings with the way in which PPI was being sold. The issues ranged from customers being placed under pressure to take out the cover to policies being sold to unsuitable customers who would be ineligible to use the insurance. Other banks who were fined as a result of the investigation included Alliance and Leicester and Egg and the industry as a whole was issued with a warning that it needed to improve.

Following the FSA’s investigations the number of people making a PPI complaint has risen dramatically. More than 1.5 million complaints have been received and this number looks set to continue to rise. The sheer scale of the issue has shocked many and has left them wondering why it took so long for this problem to be identified.

The cause of the payment protection scandal is difficult to pinpoint. The FSA has highlighted many cases where lenders failed to put in place appropriate processes to protect customers from mis-sale and this certainly, in some cases, contributed to the issue. Another seemingly important factor is the profitability of PPI. For many years the sale of the cover was seen as a significant additional revenue stream for lenders that often proved more profitable than the interest from the loans to which it was attached. As a result, many lenders offered high rates of commission to staff and, in some cases, this led staff to the use unhanded tactics and high pressure techniques.

Whatever the cause of the payment protection scandal the PPI bubble has now well and truly burst – many lenders have stopped selling the cover and the controversial single-premium form of the cover has now been banned.

If you were mis-sold a Capital One payment protection policy speak to our claims team today on 0207 471 2000.


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