Payment Protection Insurance (PPI)

PPI is an insurance product that enables consumers to pay off debts incurred through credit agreements if they die, become ill/disabled, lose their job, or face other circumstances that may prevent them from earning income to service the debt.

PPI usually covers payments for a finite period (typically 12 months). For loans or mortgages this may be the entire monthly payment, for credit cards it is typically the minimum monthly payment. After this point, the borrower must find other means to repay the debt, although some policies repay the debt in full if you are unable to return to work or are diagnosed with a critical illness. The period covered by insurance is typically long enough for most people to start working again and earn enough to service their debt.

Careful assessment of what would happen if a person became ill, disabled or unemployed should have been considered, including what (if any) benefit they would have received from existing arrangements and/or available to them from their employer. However, in the vast majority of cases, this assessment was not carried out, leading to unsuitable advice and policies.

Most PPI policies were not sought out by consumers, but were sold by sales representatives, who have been subsequently accused of using the fear of ‘losing the loan’ (ie, a loan would be refused unless PPI was taken out on it) as a way of exploiting the market and increasing their sales volumes.

“PPI was mis-sold and complaints about it mishandled on an industrial scale for well over a decade.” with this mis-selling being carried out by not only the banks or providers, but also by third party brokers. The sale of such policies was typically encouraged by large commissions, as the insurance would commonly make the bank/provider more money than the interest on the original loan, such that many mainstream personal loan providers made little or no profit on the loans themselves; all or almost all profit was derived from PPI commission and profit share. Certain companies developed sales scripts which guided salespeople to say only that the loan was “protected” without mentioning the nature or cost of the insurance. When challenged by the customer, they sometimes incorrectly stated that this insurance improved the borrower’s chances of getting the loan or that it was mandatory. A consumer in financial difficulty is unlikely to further question the policy and risk the loan being refused.

Financial products and the advice that surrounds them are usually a complex area. With one chance to prove to the correct compensation body that you have been mis-advised and one chance to appeal if you are unhappy with their decision, you may wish to consider calling on our comprehensive experience and track record, instead of trying to piece together a compelling claim yourself.