PPI reclaim costs run into the billions
Mis-sold loan insurance claims through the roof
by Russell Shackleford, 14th September 2011
Compensation claims by those who have been mis-sold PPI by their banks are expected to cost financial institutions billions of pounds, judging by the sums which have been ringfenced in order to cover the payouts.
High street banks have set aside billions to ensure that they are able to offer the legally mandated recompense to their customers, many of whom were pushed into the purchase of pricey and pointless loan insurance policies, often known as PPI or Payment Protection Insurance.
The mis-selling of PPI become systemic within lending institutions, with most borrowers having policies foisted upon them and the majority of those policies being mis-sold.
Mis-selling can come in a variety of flavours, but the primary factors include misleading information being given to the customer regarding the PPI policy, PPI being packaged with the loan by default and the broker not explaining that it is an optional extra, and people being encouraged to take out loan coverage when they are not in fact eligible to claim on it or may already be covered by other insurance policies that they have.
This unfortunately led to a vast proportion of consumers who had taken out loans paying over the odds for them, shelling out cash to cover the premiums of insurance policies that they either did not want or need, could not claim on, or even were not aware that they had taken out in the first place.
Fortunately, the FSA recently introduced revised regulations regarding the sale of PPI, hoping to put mis-selling to an end. To the delight of consumers, they also specified that these rules would be applied retroactively, meaning that those who had been mis-sold PPI due to the underhanded tactics of the bank would be eligible to receive refunds on premiums already paid, plus interest.
Millions of bank customers have now submitted mis-sold PPI claims to their banks, but the process is ongoing.