How PPI was mis-sold to the masses

The loan insurance scandal and how it started

by Russell Shackleford, 19th September 2011

PPI policies have been widely mis-sold by banks and other financial institutions within recent years, and it is due to this undeniable fact and the resultant scandal that many individuals are now making PPI reclaim attempts in order to receive compensation for the grand rip-off perpetrated by greedy bankers and unscrupulous insurance brokers.

PPI, or Payment Protection Insurance, is a form of loan insurance which is intended as a means of protecting your ability to continue repaying a loan. To the untrained ear, this sounds like an excellent policy to take out - if you should suffer an unexpected loss of income, the theory goes, you will be able to claim on the insurance and thereby receive a payout which will help you to maintain the repayment of your loan.

However, while this idea may be theoretically sound, the way in which the banks chose to sell PPI meant that vast numbers of policies were actually sold to those who did not feel that they wanted such PPI, with many people finding that they had simply had a policy added onto the total they had to pay without being informed by their bank, or having the policy slipped under the radar with financial doublespeak or confusing jargon which disguised the fact they were paying for an optional extra by taking out a "fully-protected" loan.

Others were keen to take out PPI - but were not told that they may already have loan coverage with another policy, or that due to their circumstances they would never be eligible to claim. These sorts of things should be checked by the bank beforehand - but in their relentless pursuit of profit, many did not bother.

Fortunately, the FSA has come down on the banks hard, meaning that they can no longer mis-sell PPI and that victims of mis-sold PPI can claim compensation.