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PPI Claims - About PPI

Loan Protection Insurance

Have you taken out a loan with payment protection insurance? Did you know that many of these policies were mis-sold and you could be entitled to claim thousands of pounds from your lender? Keep reading to find out how to make your claim.

Loan Protection Insurance has been sold alongside financial products for more than 30 years. There are said to be as many as twenty million active policies in the UK which generate more than £5 billion a year for banks and other lenders. The insurance is designed to step in and cover payments in event the borrower is unable to work due to accident, sickness or redundancy. Unfortunately, Loan Protection Insurance has become highly controversial in recent years largely because it has been widely mis-sold.

The controversy started back in 2005 when The Citizens Advice Bureau (CAB) launched an investigation into the way protection insurance policies were being sold. The investigation was prompted by a high number of complaints, about the cover, made to the Bureau by unhappy customers. The investigation culminated in the CAB submitting a so-called 'super complaint.' The complaint heavily criticised Loan Protection Insurance claiming it was unreasonably expensive, provided limited cover and had been widely mis-sold.

Following the super complaint The Office of Fair Tradfing (OFT) and The Financial Services Authority (FSA) launched investigations of their own. They subsequently released reports which heavily criticised the industry and demanded immediate change. It was found that many lenders were failing to train staff correctly while others were not taking steps to protect customers from purchasing an unsuitable Loan Protection Insurance policy. The worst offending lenders were, consequently, handed heavy fines and given strict instructions to change their practices. The highest single fine was handed down to Alliance and Leicester who were forced to pay £7 million for serious failing in telephone sales of policies between January 2005 and December 2007. Other lenders fined include: Capital One, Egg and GE Money.

The investigations, and subsequent publicity, prompted a wave of complaints from unhappy customers who believed they had been unfairly treated and, in some cases, tricked into buying policies they either did not want or did not need.

There are several key problems with Loan Protection Insurance policies not least that they are often very expensive. The cost of a policy can range between 13% and more than 50% of the original loan value. On a £1000 loan this could add anything from an addition £130 to additional £500 plus interest! For many people they could never hope to recoup this money from the policy, even if they did need to use it. Lenders also often failed to notify customers they could purchase Loan Protection Insurance elsewhere. For many customers this option could have provided a cheaper or more comprehensive alternative.

Another issue with the cover is the high level of exemptions. Many policies do not cover common health conditions such as back pain, stress or depression while most do not have any provision for common forms of financial hardship such as relationship breakdown or the serious illness of a loved one.

Perhaps the most well known criticism levelled at Loan Protection Insurance is that it has been frequently mis-sold. So far over 1.5 million complaints have been made concerning the policies and the majority are centred on mis-selling. The ways in which the policies have been mis-sold can vary quite considerably. In some cases the customer was not given full information concerning the costs or terms and conditions while in other cases the customer was led to believe taking the insurance would improve their chances of being given the loan. In the most serious cases, customers were intimidated into taking out the Loan Protection Insurance through the use of high pressure sales techniques and in others the cover was simply added without the customer's knowledge.

If you believe you may have been mis-sold a policy you have the right to make a complaint. It will not affect your credit rating or your relationship with your lender and you could be entitled to thousands of pounds in compensation. You can even make a claim for mis-sold Loan Protection Insurance if you have already paid off your loan and there is no limit to the number of claims you can make.


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