Loan Insurance
If you have taken out a loan in the last 10 years it is very likely your bank or building society also offered you some kind of insurance or payment protection cover. This type of insurance is very common and is designed to take over repayments if you lose your job through redundancy or are unable to work due to sickness or accident. The cover has received a great deal of media coverage in recent years, though, as it has been the subject of two high profile investigations and, most recently, a judicial review. We explore the controversy surrounding the cover.
Loan insurance has been sold for thirty years and, for much of that time, it was regarded as something of a cash cow by lenders. Bringing in around £5 billion a year it provided a very healthy additional revenue stream and was often more profitable than the loans to which it was attached. The loan insurance bubble finally burst in 2005, though, when the Citizens Advice Bureau launched a super complaint. Their complaint accused lenders of selling cover that was overpriced and provided very little actually protection. It also alleged that the mis-selling of the policies was commonplace and demanded immediate investigations by The Office of Fair Trading (OFT) and The Financial Services Authority (FSA).
The OFT and FSA responded promptly and, in 2006, after thorough investigations, they published their own reports. They found widespread failings throughout the loan insurance market and demanded immediate and radical change. Much of their criticism concerned the way policies were sold by lenders and, as a result, they fined some of the worst offending lenders. Below is a list of just some of the lenders who were reprimanded and the fines handed down. In most cases these lenders were fined for failing to train staff fully or to put into place sufficient procedures to prevent customers being mis-sold an unsuitable policy.
- Alliance and Leicester - Fined £7 million
- HFC - Fined £1 million
- Capital One - Fined £175,000
- Liverpool and Victoria - Fined £840,000
- Egg - Fined £721,000
- Land of Leather - Fined £210,000
- GE Capital (the supplier of Asda, Topshop and Debenhams storecards) - Fined £610,000
- Loans.co.uk - Fined £455,000
- Regency Mortgage Corporation - Fined £56,000.
If you were sold loan insurance by one of the above lenders then it is likely your insurance may have been mis-sold.
The media attention brought by the investigations and subsequent fines made many unhappy customers realise they had been duped into buying a policy they did not want or need. As a consequence, since 2005, more than 1.5 million people have made a complaint regarding loan insurance.
In an attempt to prevent a repeat of the scandal in 2010 The FSA announced a new set of guidelines to help protect customers from future mis-sales. Many banks were unhappy with the new guidelines, though, and, as a result, The British Banking Association (BBA) requested a judicial review. The verdict was announced in April 2011 and found in favour of The FSA. In May 2011 The BBA announced it would not be challenging the verdict and, shortly afterwards, many of the major banks began to announce the allocation of funds to deal with the loan insurance issue. Below is a list of some of the lenders who have made announcements regarding PPI and the funds they have allocated.
- Lloyds - £3.2 billion allocated
- Barclays - £1 billion allocated
- HSBC - £269 million allocated
The decision by many banks to finally deal with the mis-selling issue is great news for anyone who wishes to make a loan insurance claim. If you believe your policy was mis-sold simply complete the form above and we will send you out a claim pack in the post. All you need to do is fill in a few basic details and send the pack back to us. Once we receive it we guarantee to start your claim within 24 hours and we resolve many claims in just eight weeks. There is no limit to the number of claims you can make and you can even make a claim if your loan has already been paid off.
If you have any questions regarding loan insurance or the claims process, don't hesitate to call us on 0207 471 2000.
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