Payment protection insurance is a financial product that functions perfectly. However, due to the manner it was mis-sold, consumers could not make a claim for their benefits. As a result, millions of UK consumers purchased an insurance policy they did not need.
To avoid purchasing similar products in the future, it would be best to take note of these three things.
Read the Terms and Conditions
The fine print indicates consumer or insurance beneficiary requirements. Therefore, for any financial product, it is wise to spend time understanding this area before signing the contract. Bank employees rushed most mis-sold customers to prevent them from reading the fine print. Ask your employee to give you the terms to make sure you’re not purchasing something you cannot use in the future.
Institutions Cannot Require the Purchase of Brand-Specific Items
Banks can require consumers to purchase payment protection products and other items that can help secure any financing. However, they cannot require borrowers to purchase a specific brand of insurance policy or financial product. That product is automatically mis-sold because no single insurance policy can address a consumer’s need.
Alternatives to Loan Security
If there is a way to secure your loan through your home’s equity or property collateral, then these are better alternatives than taking out a payment protection insurance policy. Your contract with the bank ensures you will get the loan without any mis-sold product, and if you repay it on time and in full, you won’t have to deal with repossession and losses.
Payment protection insurance (PPI) is not the actual name banks sold these products to consumers. “Payment” is a general term for any amount borrowers pay regularly for any loan, mortgage, or credit card. Banks may name these products differently. If you don’t know these names, you might be missing out on thousands in refunds. Read more about them below.
Loan Repayment Insurance
Borrowers who take out general-purpose or personal loans often receive offers for loan repayment insurance. These guarantee the basic PPI coverage: a one-year repayment scheme in case the borrower gets sick, encounters an accident, or gets unemployed. If they were already sick, injured, or unemployed during the time they purchased the policy, they must consider it invalid and mis-sold.
Mortgage Protection Insurance
Mortgage protection insurance policies can pay from one to five years of repayments for borrowers who are sick, injured, or encountered an accident. Lenders make these available to consumers about to take on multiple decades of mortgage amounts. The greater the years of coverage, the higher the repayments borrowers must make. It is invalid in case it was sold to consumers already sick, injured, or unemployed.
Credit Card Protection Insurance
Credit card protection insurance covers only one year of repayments for consumers who get sick, injured, or become unemployed. Similar to loan repayment insurance, consumers with an existing sickness, injury, or were unemployed or self-employed during the time of purchase must consider their policies mis-sold.
Clydesdale and Yorkshire Banking Group (CYBG) saw its PPI figures increase to about 59,000 in the first half of the year. The National Australia Bank (NAB)-backed financial group is struggling to cope with its PPI repayments and has lost shares in the market.
Stock figures show the Glasgow financial institution losing about 6% of its shares after it told investors it needs to deal with “legacy PPI costs.” The huge £350m addition would mean a huge dent on its profit.
CYBG said its PPI figures increased after “heightened media coverage, the FCA advertising campaign, and increased claims management company activities.”
The bank acknowledged its PPI pool to increase in the coming years until 2019, the appointed date of the FCA’s claims deadline.
NAB will deal with £148m, but CYBG still takes a £202m pre-tax charge hit on its profits for the first half of 2018. Bank analysts claim NAB’s insufficient provisions is a “bit of a disaster” for the Glasgow-based financial institution.
PPI is the UK’s biggest financial scandal with almost every UK bank selling insurance policies to ineligible consumers. It has since reached the biggest refund pot of £40 million.
Recently, St John Building’s commercial barristers claim the FCA’s processes limit the actual figure Plevin claimants receive. Instead of the 100% PPI refund, the Watchdog’s procedures allow banks to pay as much as 20% only to PPI mis-selling victims.
According to commercial barristers, the Financial Conduct Authority’s guidelines have lowered the value of consumer’s collective PPI claims by £18 billion.
St John Buildings’ barristers believe that the Plevin case is not paying the full refund of afflicted consumers. The amount repaid at most is only 20% of the original PPI price.
According to barrister Elis Gomer, consumers who question the FCA’s accountability for citizens are rightful to do so. The UK public is at a loss with the underpayments made with the grace of the City watchdog.
The FCA and the UK Supreme Court had considered Plevin a landmark case. However, the case’s overall influence in the process is not clear. While consumers are satisfied to have received refunds from Plevin-qualified cases, some savvy claimants have forwarded their refunds to be incomplete. Gomer said most of these cases were settled with higher refunds behind closed doors.
The UK’s total PPI bill is at £40 billion. If the FCA’s oversight is amended, the bill could reach £50-£55 billion, making it the single biggest financial fraud case in the history of the country.
The FCA has appointed 29 August 2019 as the PPI claims’ deadline. It has used an advertising campaign to spur customers to make complaints, an act it considers a success provided the PPI claims’ increase in the first half of 2018.