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Payment Protection Insurance

Payment Protection Insurance

Payment protection insurance or PPI is a type of insurance cover sold alongside mortgages, loans, hire purchase agreements, store and credit cards. The purpose of the insurance is to cover the borrower in the event they are unable to work due to sickness, accident or redundancy. It has been widely sold for more than thirty years and there are an estimated 20 million active policies in the UK. Unfortunately, it is estimated that as much as 90% of all payment protection insurance have been mis-sold.

For many years PPI provided a very lucrative additional revenue stream for banks and other lenders. In fact, in many cases, the lender earned more from the PPI than from the interest on the loan itself. Because of the profitability of payment protection insurance many lenders encouraged sales staff and advisors to sell the maximum amount of policies possible by offering large rates of commission. Sadly this led to many instances of high pressure selling where customers felt they had to take out the cover even though they may not have wanted or needed it. In other cases customers were incorrectly told the cover was compulsory or that taking out the policy would improve the chances of their loan being approved - all of these statements are untrue.

Another common way in which payment protection insurance was sold was not by giving the customer incorrect information as such, but by giving very limited information. This includes not fully explaining the costs to the customer or not explaining that alternative cover may be purchased elsewhere. Crucially many sales people did not explain the exemptions attached to the policies. Exemptions are a significant feature of payment protection insurance and a large part of what has helped to make them so controversial. Most policies do not cover common ailments such as stress, back pain and depression while others do not cover pre-existing medical conditions.

In many cases sales staff not only failed to give the customer full information regarding the terms of the cover, but failed to ask the customer the appropriate questions to ascertain whether they were suitable for a policy. As payment protection insurance predominately covers the policyholder in the event they are unable to work it is clearly important, for the policy to be of any use or value, that the customer is in employment. Astonishingly, thousands of policies were sold to people who were retired, unemployed or in full time education who had no need for the cover and could never make a claim.

In 2006 the payment protection insurance bubble finally burst when The Financial Services Authority and The Office of Fair Trading investigated the industry. They found widespread failings throughout and many lenders were handed huge fines. As a result of the investigations, new guidelines were put in place to protect customers from mis-selling. The media coverage surrounding the scandal also empowered thousands of victims of mis-selling to step forward and make a complaint. So far, 1.5 million people have made a claim, but it is estimated that millions more could be entitled to a refund. To find out more call us on 0207 471 2000.


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Belmont Thornton Limited is regulated by the Claims Management Regulator in respect of regulated claims management activities; our registration is recorded on the website www.justice.gov.uk/claims-regulation number 18273

Belmont Thornton Limited is incorporated in England and Wales, Company number 6621233, whose head office and registered office is at Suite 2, Unit 25, The Coda Centre, Munster Road, London, SW6 6AW. VAT Registration number 945 3375 06.

Belmont Thornton Limited is registered with the Information Commissioners Office. Registration number Z1728023 and holds a Credit Consumer License issued by the Office of Fair Trading license number 634655.

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