Mis-sold PPI still making itself felt

Banks set aside billions for compensation claims

by Russell Shackleford, 21st September 2011

The mis-sold PPI scandal is still having repercussions across the financial world, with high street banks being forced to pay out billions of pounds in compensation to customers who were caught on the wrong end of greedy insurance brokers' schemes to make a vast profit at the expense of consumers.

PPI, or Payment Protection Insurance, is a type of loan insurance which is intended to set up a situation in which a borrower is less likely to default on a loan. This is achieved through offering an insurance payout if a situation should arise wherein they should lose a major source of income and thereby be unable to keep up their loan repayments by their ordinary means.

Unfortunately, many of those who were offered such policies found that the coverage was not as extensive as it was presented, and in fact that PPI policies had been mis-sold to many people who never had any chance of making a claim at all due to their personal circumstances.

Yet others were told to take out PPI policies without it being made clear that they were optional, or, in the worst-case scenarios, were not even made aware that they would be paying for the policy, with the banks cloaking the coverage under terms like "fully-protected loans" without making it clear that this was only one type of loan with a specific kind of loan insurance attached to it.

Fortunately, the FSA challenged the untoward attitude of the banks towards the mis-selling of PPI, and, after victory in a judicial review, placed the banks in the unenviable position of having to compensate anyone who had been mis-sold PPI. The banks have now set aside billions of pounds to ensure that their customers get the redress which they so richly deserve after their unpleasant experiences.