Mis-sold PPI claims skyrocket

Banks pay out billions to discontented customers

by Russell Shackleford, 13th September 2011

Claims for compensation are flooding in after the revelation earlier this year that PPI, or Payment Protection Insurance, had been widely mis-sold to bank customers who had taken out loans.

PPI is a form of loan coverage which is supposed to reduce the likelihood of a borrower defaulting on their loan by paying out should they suffer a loss of the income stream which they had presumed would allow them to repay the loan when they elected to take it out.

In principle, PPI may be useful for borrowers, as it can provide an extremely valuable safety net. Unfortunately, the greed of the banks led to PPI mis-selling, which meant that many people with no need for a policy or even those who could not use it had PPI foisted upon them, leading them to pay extortionate sums for unnecessary and often worthless loan insurance policies.

Once this issue came to light, it caused an uproar amongst astute consumers, many of whom attempted to claim redress from the banks on the grounds of having been misled. Indeed, many of those were victims of mis-sold PPI, it turned out, had not even been informed that they would be paying for such insurance coverage, and had simply had it added to the total sum of their loan repayment without their consent. This was often cloaked in sneaky terminology by the banks, such as describing it as a "fully protected loan.

Fortunately, after an FSA ruling followed by a judicial review, the banks have been placed under obligation to compensate all of their clients who they have wronged in this issue. Billions of pounds have been ringfenced to serve as recompense for borrowers who were mistreated by lending institutions, and millions of people are set to claim for the PPI that was mis-sold to them.