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Mis Sold Income Protection Insurance

Lenders have not been too happy with legislation regarding mis sold income protection insurance but with the new guidelines set forth by the Financial Services Authority in the latter part of last year, they are even more displeased. Mis sold income protection insurance has been stirring a significant amount of controversy in the last decade but one thing is certain, increasing numbers of consumers are applying for and being granted PPI refunds.

One of the new guidelines which lenders are most upset about is the fact that all loans will now be judged according to new rules, no matter when the insurance policy was sold. In other words, each PPI claim that comes up for review will be subject to the new laws, not those which were in force when the policy was sold. The new guidelines that has lenders up in arms is that all aspects of the policy needs to be explained to consumers (including conditions and exclusions) and that they be given a document to sign which clearly states that the cover is optional. This means that any policy from the past decade could potentially be considered mis sold income protection insurance because it was not common practice to make consumers sign the 'option document.'

Arguing Semantics

As far as many consumer advocate groups are concerned it's a matter of arguing semantics. It was always a rule that payment protection insurance was optional and not mandatory and that lenders could not make a loan conditional to the consumer purchasing this cover. The only thing the document does is provide some amount of security for the lender against being held guilty of mis sold income protection insurance because the consumer signs a disclaimer that the cover was explained and that they are either opting in or opting out. The British Banking Association actually requested the appeal based on their view that it is unfair to base old policies on new laws. Again, it seems to be semantics because the only thing that changes is the sign off!

What All This Means to PPI Refunds

As far as consumers are concerned, these new rulings will actually help them win a PPI refund because the burden of proof will rest on the lender. . Nonetheless, this may not even be needed in many cases because some of the old loan docs violated the law because they had tick off boxes to opt out of cover. Since the law always read that cover was optional, the tick off box should have read to opt in. Therefore, the existence of the signatory document is a moot point in cases like this because the law was already broken by making consumers opt out instead of making them opt in!

If you have any question as to how these new guidelines will affect any PPI claims against mis sold income protection insurance that you intend to file call Belmont Thornton claims team for up-to-date information regarding the judicial review. The claims team are available on 0207 471 2000.


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