Payment Protection Insurance, also known as PPI, is a type of
insurance that is intended to cover consumers to help them continue
making payments towards their debts if they suddenly lost their
source of income due to ill health, accident or redundancy.
The majority of PPI Policies were sold alongside various credit
products such as loans, credit cards and mortgages. Salespeople
often persuaded the consumer to enter into a credit agreement in
which they attempted to sell a PPI policy at the same time. The
salespeople were also often paid a high commission for each policy
they sold, and would often adopt a unfair tactics in a bid to
pressure the consumer into purchasing a PPI policy, regardless of
whether it was even necessary or suitable for the consumer's
needs.
Many consumer groups became increasingly concerned about the
lack of regulation and restrictions about the selling of PPI
policies alongside credit products. The main problem stemmed from
the method of selling of PPI to the consumer. The consumer was put
in a vulnerable position and there was a greater risk of the
product being mis-sold.
Financial Services Authority (FSA) rules require all businesses
which sell PPI to act openly and honestly towards their consumers
and to ensure that any policy which they recommend was entirely
suitable for the consumer's needs, as well as making consumers
fully aware that there could be better PPI deals on the market.
Consumer groups fears about the degree to which the laxity of
point of sale PPI rules were open to abuse and were proven in an
analysis of PPI mis-selling claims, this analysis revealed the
shocking way in which PPI salepeople recklessly breached FSA rules
when trying to secure a PPI sale. The most common examples of PPI
mis-selling include the following:
- The salesperson pushed a policy which was unsuitable for the
consumer's needs, even though there were other cheaper, more
suitable policies available;
- Payment Protection Insurance was added to the sale without the
consumer's knowledge or consent;
- The salesperson lead the consumer to believe that they could
only buy PPI then and there, and that they would not have the
option at a later stage;
- Payment Protection Insurance being included in the credit
agreement, requiring the consumer to specifically ask for the PPI
to be removed if he didn't want it;
- The consumer being told that their approval for credit was
conditional on them purchasing PPI;
Despite these widespread concerns, the FSA attempt to restrict
point of sale for PPI marketing, and it was left to the Competition
Commission to take this action. In October 2009 the Competition
Commission decided to impose an absolute ban on selling PPI
alongside a credit product on the grounds that it was harmful to
competition and it made it difficult for the consumer to find the
best deal. The banks appealed this ruling and the same month the
Competition Appeals Tribunal overturned the new rules that the
Competition Commission had acted unlawfully because its
consultation process was flawed. The Competition Commission
conducted a proper consultation and in May 2010 an absolute
prohibition on selling PPI alongside credit products came in to
force.
PPI policies which were sold alongside credit products are
substantially more likely to have been mis-sold than any other PPI.
If you have one of these policies, or you have had one in the past,
you may be entitled to make a claim for a refund of thousands of
pounds in compensation.
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