How the FSA dealt with mis-sold PPI

The loan insurance scandal laid bare

by Russell Shackleford, 20th September 2011

One of the biggest successes of the FSA in the past year was the revelation of mis-sold PPI to customers who may have been affected by it, ensuring that people who were tricked by their banks into shelling out for worthless insurance policies are able to claim compensation for it.

But there are still those who, while they may have heard of PPI, still do not know exactly what it is or how it was mis-sold, and for those people, some essential knowledge may be a great boon to their financial situation.

PPI is also known as Payment Protection Insurance and is intended as a means of insuring a loan so that, if for whatever reason the borrower should lose their ability to keep up repayments, the cover will kick in and grant them sufficient funds to continue paying back the loan for a period of time, thus preventing the individual inadvertently defaulting on the loan due to unforeseen circumstances.

While it sounds like a good idea in principle, in practice PPI was widely mis-sold to customers - mis-selling being a situation whereby a consumer ends up paying for something after being misled in some fashion by the person selling it. In the case of PPI, this took a variety of different forms.

Some people were told that they would need to pay for PPI coverage if they wanted the loan, or that it would increase the chances of having their loan approved - neither of these are true, as PPI is an entirely optional extra.

Others did like the idea of having a PPI policy, but were not informed that their circumstances rendered them unable to ever claim on the insurance, or that they may already be covered by any other policies they have.

And a final group simply had the cost of PPI added to their loan without being told at all.

If you feel you may have been mis-sold PPI, fortunately you are now able to make a claim to receive compensation.