by Mark Johnston
It seems that the UK’s biggest protection racket is not run by thugs in back street alleys, but from staff in many of Britain’s banks.
The real profit from selling loans often does not come the product themselves, but from the insurance sold along side them.
One of these insurances is the payment protection insurance (PPI) policy, according to figures there are approximately 20 million payment protection insurance policies (PPI) sold in the UK. These policies generate around £5 billion a year fro the companies involved in them.
Payment protection insurance (PPI) is basically a type of insurance that is usually taken out along side a loan, mortgage, credit or store card.
Under a payment protection insurance policy, an agreed sum of money is paid each month to fully cover or cover a percentage of the payments due on the mortgage or loan etc.
Typically the insurance will cover mortgage or loan payments due for 12 to 24 months if the policy holder is unable to work due to:
– becoming unemployed, through no fault of their own
– having an accident
– becoming sick
Payment protection insurance (PPI) sold in the right circumstances can be very helpful to some, but it has been widely mis-sold, thus leaving many paying hundreds of pounds for potentially worthless cover, with out them even knowing it. Therefore it is vital that anyone still considering PPI insurance fully understands what cover they are buying and ensure the policy meets all their requirements.
These insurance policies have generated a lot of news recently due to the Financial Service Authority (FSA) amongst others tackling the issue of poor selling or mis-selling payment protection insurance.
The payment protection insurance industry has never been in so much trouble: millions of people it seems have been mis-sold these policies.
In October 2010, the banking trade body, the British Bankers Association (BBA), decided to take legal action against the Financial Service Authority’s (FSA) plans to compensate people who where mis-sold payment protection insurance’s. However this failed when in April 2011 the high court ruled in favour of mis-sold consumers and therefore the banks had to accept the verdict.
The financial Service Authority (FSA) has already fined many major financial providers including Alliance and Leicester, Liverpool Victoria and Capital One for ‘not treating customers fairly’.
Customers were mis-sold policies from sales personal failing to ensure the customer understood the terms of the payment protection insurance and that the policy was appropriate to the individual customer.
Many customers it seems were told many different things in order for them to take out the insurance such as:
– it was compulsory instead of optional
– they were not told they had a ‘cooling off period’
– they were unable to complete their application unless the insurance agreement was signed
– implied or stated that it would be more expensive for a customer not to take the insurance
In short anyone who believes they have been mis-sold payment protection insurance can now claim their money back.
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