At the moment there is a lot of media coverage about Payment
Protection Insurance, otherwise known as PPI. There have been
various advertisements which have promised consumer's full refunds
for thousands of pounds, but many people have mistakenly believed
that anyone who has ever had a PPI policy is automatically entitled
to compensation.
PPI was first drawn up to cover consumers' repayments on debts
such as loans and mortgages if the consumer was unable to continue
their payments because they lost their income. In theory PPI would
be a helpful product to many consumers and would provide them with
peace of mind about their debts. However, many financial services
companies saw an advantage to PPI policies as a way to make more
money out of their consumers. These unethical companies began to
produce PPI policies which were not only extortionately overpriced,
but also contained highly restrictive terms aimed at limiting the
number of people who could ever make a claim against the PPI
policy.
Even though many PPI policies are overpriced and very poor value
for money, this in itself does not mean that the consumer is
entitled to make a claim for compensation. Despite this, in the
case of some types of products and services, the law has recognised
that consumers cannot be expected to fully understand the different
products which are on offer to them and that they are at the mercy
of salespeople. Because of this reason the Financial Services
Authority (FSA), which regulates the financial sector, has enforced
certain rules which all businesses are required to follow when
selling a PPI products to consumers. These rules make it crystal
clear that every business will need to deal with consumers in an
open, honest and fair way that clearly explains the terms of the
financial products.
As the majority of consumer's rely heavily on the advice of
financial services professionals when purchasing products such as
insurance, all businesses that sell financial products are required
by law to make sure that any products they sell are entirely
suitable for the consumer. Wherever a financial services company
fails to act in accordance with these regulations the sale is
deemed invalid because the product has been mis-sold to the
consumer. These principles apply to the sale of PPI and if it can
be shown that a salesperson has breached any of the FSA rules and
regulations, then the PPI has been mis-sold and the consumer will
be able to make a claim for compensation and receive a full
refund.
It must be noted that it is not the PPI Policy itself which is
the problem, even if the policy represents an extremely bad deal
for the consumer, the real problem lies in the way in which the
policy is sold. However, it is easier to demonstrate mis-selling in
the case of a policy which is very bad value for money, because the
salesperson will have to make more of an effort to ensure that the
consumer is aware of all the policy's negative points and will
often find it difficult to explain why they didn't advice the
consumer choose a better product.
It is important to remember that the Financial Ombudsman
Service, the independent adjudicator of complaints about regulated
financial businesses, upholds 3 in every 4 complaints about
mis-sold PPI, and it estimates a total of 90% of all PPI policies
have been mis-sold. Whilst it is not true that everyone who has had
PPI is entitled to a refund, these figures show that the vast
majority of consumers who have had PPI probably have a genuine
claim for compensation.
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