Mis-sold PPI compensation hits banks hard

Loan insurance scandal causes outrage

by Russell Shackleford, 10th June 2011

Compensation for the mis-selling of PPI is set to cost the banks billions of pounds, it has been reported.

PPI, or Payment Protection Insurance, is a form of loan insurance which has caused great controversy in the financial sector of late. This is due to the fact that it has been so widely mis-sold - meaning that a vast number of people have been saddled with expensive insurance policies which they did not want and which may not even be applicable to their situation, meaning that they would be unable to make a claim even if it should turn out that they needed the insurance.

PPI mis-selling was seen as an easy way to make money for the banks - in theory it could be useful for some borrowers, who might find that it allowed them to keep up repayments on their loan if they should lose a primary source of income, but many others were encouraged to take it out when their circumstances rendered them ineligible for the loan insurance.

This meant that millions of consumers had been encouraged to take out high-priced yet useless PPI policies by their banks, who in many cases chose not to let their customers know that the insurance was optional, could be unnecessary or may not even be appropriate to their circumstances.

Due to this, the banks have been forced by the FSA - following a recent court battle - to set aside billions of pounds in potential compensation for wronged borrowers who have been paying for mis-sold PPI, potentially for years.

The reasons that PPI may have been mis-sold vary widely, and include the insurance broker failing to explain the policy adequately, or the borrower being approved for a policy which they later turned out to be ineligible to make a claim on. Fortunately, these consumers will soon see redress.

If you have been a victim of mis-sold PPI, you may be able to claim back PPI today.

Claims Financial