Payment Protection Insurance Explained

The purpose of Payment Protection Insurance is to assist a borrower in meeting the repayments of a loan where they are unable to meet the repayments themselves due to an accident, sickness or involuntary unemployment.

These insurance policies can have various names including Payment Protection Insurance (PPI), Payment Protection Plan (PPP) and Accident Sickness and Unemployment policy (ASU). If you see any one of these on your loan, you may have a claim.

Did you know?

  • Typically a PPI policy only lasts for 5 years, regardless of the full term of the loan?
  • The majority of lenders charge interest on the PPI premium, at the same rate as the loan?
  • PPI is often added to a loan without the consumer’s knowledge?
  • The value charged for the PPI policy may not be the value paid to the insurer? There may be some commission involved.
  • The value charged for the PPI premium can often be as much as 25% of the loan value?
  • PPI is often sold to consumers who would not be eligible to claim under the policy?

When a complaint of mis-selling is made to a bank or broker, they frequently reject the complaint in the hope that the individual will not pursue the matter further.

The Financial Ombudsman Service (FOS)- a body which considers allegations of mis-selling in the financial sector- recently released the following figures. This table shows the percentage of complaints which were rejected by the lenders, but which were then upheld by the FOS: -

Lender Percentage of Complaints upheld:

  • Black Horse 99%
  • Capital One 98%
  • Egg 99%
  • Lloyds TSB 98%
  • Northern Rock 98%
  • Royal Bank of Scotland 94%
  • Barclays 93%
  • Abbey 60%
  • Alliance & Leicester 74%
  • MBNA 99%
  • Natwest 89%
  • HSBC 79%
  • Halifax 79%
  • Nationwide 63%

This table clearly shows that the lenders are rejecting valid complaints of mis-selling in the hope that the individual will not pursue the complaint any further.

CLAIM CHECKLIST

You may have a claim for mis-selling if: -

  • You were told that PPI was compulsory;
  • You were not in full time employment when you took out the policy;
  • Payment Protection Insurance was sold to you without your knowledge;
    You weren’t given full details of the insurance policy;
  • You were not told that you could get PPI elsewhere;
  • The full cost of the policy was not explained to you.

If you think you may have a claim, or for more information on mis-sold Payment Protection Insurance, please contact our Civil Litigation Department or e-mail Tonina@maddersons.co.uk.

Broxbourne Office, 97 High Road, Broxbourne, Herts EN10 7BN
Tel: 01992 444421 Fax: 01992 443111
Hitchin Office, 7/8 Brand Street, Hitchin, Herts SG5 1HX
Tel: 01462 418630 Fax: 01462 459477
Email: info@maddersons.co.uk