What are the major grounds for mis-sold
PPI?
The Mis-selling of Payment Protection Insurance (PPI) usually
occurs whenever a business, markets, promotes or sells a PPI policy
in a manner that doesn't follow the rules put in place by the
Financial Services Authority (FSA). These rules were designed to
protect consumers from unfair and deceitful business practices.
They can be found in the FSA regulatory handbook and are referred
to as the Insurance Conduct of Business Standards (ICOBS).
ICOBS provide a detailed set of guidelines in which all
financial services providers should deal with all aspects of their
insurance business, not just PPI. However, OCOBS require all PPI
sellers to act in a fair, open and honest way towards their
customers; collect the relevant information to ensure that the
products they recommend are suitable for each consumer; keep
adequate records; and make consumers fully aware of any
restrictions or exclusions contained within the policy.
There are a variety of situations where PPI can be sold that is
in breach of some of these regulations. Listed below are some of
the most common grounds for claims:
The credit product was made conditional on the
purchase of PPI
The majority of PPI policies were sold alongside loans, credit
cards, and finance agreements. There are a various cases where
consumers have been lied to in order to try and close a sale. Some
customers were told that their credit application would not be
approved unless he also purchased PPI cover.
The PPI was added without the consumer's
consent
PPI is an optional extra, but it has been known that many PPI
companies written it into credit agreements by default, forcing the
consumer to specifically ask for the PPI to be removed if they did
not want it. Consumers rarely did this because in most cases the
PPI was buried in the small print and they were not clearly made
aware of its existence until it was too late.
The consumer was younger than 18 when the policy was
taken out
It is illegal for someone under the age of 18 to enter into
certain types of contracts in their own name, and this includes
credit agreements and other financial products such as insurance.
This means that if you took out a policy before you were 18, this
policy is invalid. Whilst this sounds obvious, many financial
salesmen ignored this basic legal principle and sold PPI polices to
minors in order to increase their own commission.
The consumer was over 65 when the PPI policy was
sold
A PPI contract, like any insurance policy, is effectively a bet
that the insurance provider will not need to pay out. However,
because people can be forcibly retired after the age of 65, most
PPI policies will not provide cover beyond this age as it is much
more likely that these consumers will need to claim under the
policy. However, this has not stopped PPI sellers from persuading
consumers who are over the retirement age to purchase a PPI policy
even though it is of no use to them whatsoever.
The policy was unsuitable for you
Financial services providers must not sell insurance products to
consumers unless they have gathered sufficient information to give
appropriate advice, and the policy which they recommend is suitable
for the consumer. The salesperson should enquire about the
consumer's state of heath, employment status, and any other payment
cover or life assurance which the consumer has. The salesperson
should also specifically make the consumer aware of any
restrictions or exclusions contained in the policy terms which
might be relevant. Selling a PPI product which is unsuitable for
the consumer's circumstances and needs is one of the most common
grounds for mis-sold PPI claims.
You had a pre-existing illness such as stress or
back ache
Many types of illness were routinely excluded from PPI polices,
which would not cover consumers in the event that this illness
meant that they were unable to work at a later date, although the
customer would have rarely been made aware of this. Illnesses which
commonly fall into this category included any kind of mental
illness or stress-related problem and any kind of muscle pain.
You were not advised you could get the same product
cheaper elsewhere
The FSA rules state that credit providers are not allowed to
create the impression that consumers are limited to their own range
of products when choosing whether or not to purchase PPI, and must
advise customers of their right to shop around for the best deal.
However, very few credit providers have complied with this rule,
and a large proportion of mis-selling claims are based on them
failing to give this advice.
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