Mis-sold loan insurance backfires on banks
by Russell Shackleford, 7th October 2011
PPI, or Payment Protection Insurance, is looked down upon by
many in the wake of the mis-selling scandal which saw many lumbered
with expensive loan insurance policies. But is PPI necessarily a
bad thing, and if not, how did it end up reviled by so many?
A PPI policy, which can be known by many other names such as
loan protection or loan insurance, is a form of coverage which
ought to ensure that, if a borrower should find themselves
unexpectedly deprived of income in a fashion which renders them
incapable of paying back their loan, they will receive a series of
payout enabling them to continue repayment and avoid
defaulting.
This may sound all very much like a situation in which one would
be thinking "so far, so good", but unfortunately the depths of PPI
mis-selling transformed this benevolent form of insurance into a
dangerous game.
Essentially, borrowers were encouraged to take out PPI even when
they could never have benefited from it, were already covered by
other forms of insurance, or simply did not want it. Some were even
lied to and told that they needed it to take out the loan, or that
it would improve their chances of being approved for one; an
unlucky few had it added to the cost of their loan without even
being told what it was or that they would be paying for it.
Of those borrowers who did try to claim on their PPI, many found
that they had been mis-sold a policy and were unable to. The banks
had offered a useless and pricey service to their wretched
customers.
Fortunately, billions of pounds in compensation had to be set
aside after the banks' duplicity was revealed, and now millions of
people are eligible to claim their mis-sold PPI compensation.
Testimonial
"I just had to put pen to paper and write to say I'm more than delighted with my settlement that you won me back from my PPI I had with Lloyds TSB. The Claim Forms were simple to fill in. It was a breeze"
Mr R Evans 11 Nov 2010