01 February 2010
BrunelFranklin.com explains PPI
While there are a number of ways in which you can protect yourself against loss of income, one of the more controversial forms of cover is payment protection insurance (PPI). Here leading financial claims company Brunel Franklin explains PPI and the history behind the much publicised insurance.
What is PPI?
PPI is designed to cover you if you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. But while it can offer a sense of security, the cover can be overpriced, filled with exclusions and may often be mis-sold. For example, policies do not pay out if you are self-employed, and if you do make a claim, the benefit is often little more than the premium paid.
PPI under scrutiny
The problems associated with PPI were first highlighted in a major way when a mystery shopping exercise by a consumer organisation found that consumers were being ‘duped’ into buying the cover.
It was found that people were at risk of unknowingly purchasing the cover because staff at some providers added PPI during the sales process as a matter of course. Elsewhere, a number of lenders were fined by the Financial Services Authority (FSA), the City watchdog, for mis-selling. At the same time, an investigation by the Office of Fair Trading (OFT) exposed sales staff for telling borrowers that the cover was compulsory, or including it in loan quotes without explaining that it was optional. The OFT referred the PPI sector, including MPPI, to the Competition Commission in February 2007.
What progress has been made by the Competition Commission?
In January 2009 the Competition Commission ruled that banks should be banned from selling PPI alongside credit cards and personal loans. The Commission’s investigation concluded that lenders have an unfair advantage selling PPI with credit products, resulting in an uncompetitive market where consumers are overcharged. It ordered that from 2010, banks and retailers making a loan or credit offer must wait a week before they can sell PPI to the borrower. The Commission hopes the seven-day cooling off period will encourage consumers to shop around for the best deal. Single-premium PPI – when the cost of the insurance is added to the debt so that borrows repay interest on both – has also being prohibited. The Commission also ordered lenders to provide personal PPI quotes and annual statements to customers.
Check with your lender
If you take out a loan, check whether the quote includes PPI and remember that it is not compulsory. If you don’t want it, you can ask the lender to remove it. Consider a stand-alone policy If you do want to take out PPI, it is generally cheaper to buy stand-alone cover.
Claim a refund
Consumer champions BrunelFranklin.com have already helped thousands of people reclaim millions of pounds in mis-sold PPI refunds. If you think you have been mis-sold a policy, take Brunel Franklin’s test online now.
