Customers claim compensation for mis-sold PPI

Banks pay out billions to recompense clients

by Russell Shackleford, 12th September 2011

Millions of customers are expected to complain to their banks over the mis-selling of PPI, or Payment Protection Insurance.

High street banks have set aside billions of pounds in potential compensation for those who were ripped off by their underhanded tactics relating to PPI sales, after the Financial Services Authority introduced new regulations requiring lenders to offer redress to borrowers who were wronged by their greedy approach.

PPI is a form of loan insurance, meaning that the customer takes out a policy which guarantees to pay out if they find themselves in unexpected dire financial straits and are unable to continue to afford the repayments on the loan in question. This can certainly be a useful form of cover if it is taken out by someone who fully understands the exemptions and limitations of a PPI policy, but it was found that for the most part the banks were simply forcing these policies onto people without giving them a choice or explaining to them what it was they would be paying for.

The majority of problems with mis-sold PPI come from the fact that, for most people, there is simply no use for it. Many have found that they would never have been able to claim on their PPI policy as it was not suited to their personal circumstances and is therefore worthless, whereas others have similar insurance cover from another policy. Either way, the problem stemmed from the banks' irresponsible treatment of customers wherein they mis-sold PPI to customers in a vast percentage of cases.

Fortunately, the FSA's new rules have made this a thing of the past, and they seek even to change the past, by forcing banks and other financial institutions to ensure that consumers who were mis-sold PPI are granted compensation. Finally, justice for consumers may be seen to be done.