PPI Rip Off
Loan protection, loan assurance, payment insurance, payment protection, and payment protection insurance (PPI)
are types of insurance in which people were sold protection for payments made to
finance institutions. The coverage was supposed to help borrowers who fell
behind on payments that were insured through PPI. PPI is supposed to cover a
borrower by stepping in to cover repayments as a result of involuntary
unemployment, sickness or accident. Problems arise where the cover is mis-sold
and customers are lefting needing to make a
PPI claim to
recover their money.
It is difficult to pinpoint the cause of the PPI scandal and there is no likely
single cause. Part of the problem, at least, was the fact that PPI was extremely
profitable for lenders. PPI on a loan, for example, often cost between 13-25% of
the core loan value. This can add a substantial amount to the overall borrowing.
Added to this, the payout rates on this type of insurance can be very low. In
many cases this meant that lenders actually made more profit from the sale of
PPI than from the insurance on the loans. The industry as a whole generated in
excess of Â£5.5 billion a year which led many people to dub it the 'PPI rip off.'
Over time the sale of PPI spread as it went from being sold with loans and
mortgages to be sold alongside credit cards, stores cards and hire purchase
agreements. As the sale of PPI became more common the standard of sales fell in
some areas with some staff not being correctly trained or being given the
appropriate product knowledge to effectively sell the product.
How were policies mis-sold?
Many people who refered to the 'PPI rip off' do so out of frustration after
discovering they have been sold a policy they don't need or are ineligible to
use. In many cases customers do not discover they have been mis-sold a policy
until they try to use it and are told they are ineligible to make a claim. Given
that this cover was often 'recommended' to them, customers are shocked that they
were sold and have been paying for cover they are unable to use. Common reasons
people are ineligible for cover are because they are self-employed or aged
sixty-five or over. You may also have been mis-sold cover if your were not in
employment at the time of the sale, the terms or costs of the policy were not
made clear to you or you were pressured into taking out the cover.
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