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Archive for tag: Problem with PPI

What Was the Problem with PPI?

With the furore around payment protection insurance (PPI) still going strong, more so with the FCA adverts strongly advising people to make a decision and lodge their claim ahead of the August 2019 PPI deadline. What has become lost in the saga is pinpointing just what the problem was with PPI.

Problem

The PPI saga has taken many twists and turns. Just when you thought all was going quiet on the PPI front, something new would come along and inject new life into the scandal.

But what was the problem? Why did PPI become such an issue?

#1 PPI was expensive

Insurance products can be expensive. The more cover they offer, the more specific they are, the higher the cost.

For a specific life insurance policy, for example, you can pay high premiums every month. But, if you have the peace of mind that should the worst happen, you are covered, you may think this is a price worth paying.

People assumed that the PPI policy that they were paying for would do the same. But it didn't. It was expensive, especially for the very little cover that it did offer. Adding insult to injury is that for some customers, they were paying for an insurance policy that didn't offer them any cover because they were ineligible under its terms and conditions.

#2 Long claiming process

If you did decide to make a claim on the PPI policy, you would come up against two problems;

I.  You may have been horrified to find that the insurance policy you were relying on for cover did not actually cover you or your partner

II. If you were 'covered', the process of making a claim was long, drawn-out, overly complex and off-putting. It took some people - the small minority who did make a successful claim - over 12 months for the policy to kick in.

#3 How it was sold

Do you remember how you were sold PPI, or when it was sold to you?

This was one of the reasons why the sale of PPI was referred under marketing and selling rules to the now closed Competition Commission in the late 1990s.

Customers were being told they had to buy it, it was part of a package or the customer was given the impression that to buy it would stand their application for credit in a better light.

The inference that it was a compulsory purchase led many of us to believe that the bank had our best interest at heart and was selling us a policy that was useful.

It wasn't.

#4 Advised sales

There were also people who were advised to buy PPI, although the reasons why were not made clear.

As a result, there have been many changes in how insurance products can be sold by banks. PPI is no longer a valid insurance product. If you want to protect repayments on loans, take a look at other products such as income protection insurance.

In the meantime, claim PPI compensation with the help of Payment Protection Scotland.

What is the Problem with PPI?

The PPI saga has been ongoing for some time. Just when you think the flames of the situation have dulled to glowing embers, something comes along and re-ignites the PPI fire.

What

But the PPI fire is about to be extinguished for good with the PPI August 2019 deadline only months away. Before we get to that point, however, there are many more potential issues that could fans the flames, bringing the PPI scandal to an explosive end.

The recent issue to have hit the PPI compensation saga is the introduction of a deadline. Set for August 2019, many people, customers and PPI critics alike, have been left wondering why the Financial Conduct Authority (FCA) always so set against a PPI deadline, changed its mind. Have the banks and lenders finally got their own way? Why the change in the FCA stance?

These are good questions and ones that need to be answered. Critics of the deadline point out that as yet, there are 60% of PPI compensation claims yet to be made which suggests that either people don't know they have PPI or they don't know how to claim.

Changes at the top

The FCA came into being after it became apparent that its predecessor, the Financial Services Authority (FSA) was not powerful enough to control the banks. The FSA could only suggest or recommend changes; it had no enforcing powers.

When the FCA came into being a few years ago, its then head was a staunch critic of the banks and their power, as well as their attitude that they can and could do anything they wanted.

Martin Wheatley has a combative approach to the banks and lenders and was quite clear in what needed to happen.

But, as the PPI compensation saga ran on and on, with the rate of PPI claims being submitted showing no signs of slowing, people started to question when it was going to end.

Martin Wheatley was replaced as the head of the FCA and the mood has been different. Although the FCA say that as a body, they are not bowing to pressure from the banks and lenders, they recognise that the PPI compensation saga is undermining the British banking industry.

But, say critics, this situation was brought on by the banks themselves and not the customer.

What it means for customers

For customers who have yet to make a claim for PPI compensation, the PPI deadline set for August 2019 is a clear red flag: make your claim by this time, or miss out on claiming your money back.

The FCA has promised that they will mount a robust consumer campaign so that customers are aware of the deadline, how to claim, what to look for and so on.

There has been a report published recently that suggests although people do know about PPI, they don't think they are entitled to claim - and it is this group of people who need to be reached with the campaign!

Do you have a claim for PPI compensation? Call Payment Protection Scotland today for a no obligation chat.

What Was Wrong with PPI?

Payment protection insurance (PPI) - a phrase that has strikes fear into the heart of the UK banking industry - is a now infamous policy at the root of an embarrassing mis-selling scandal. An embarrassment for the banks and regulatory authorities, there is now millions of pounds in compensation being paid to customers every month.

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Selling these policies to customers brought them handsome profits. The representatives who sold them reaped huge commissions.

But how did it all go so wrong and how come we fell out of love with a policy that sounds a good idea, on paper at least?

What does PPI promise to do?

In a nutshell, consumers like you, bought the policy thinking that in the event of you being unable to make repayments on loans and other products, the policy would 'kick in' and make the repayments for you.

Sounds a great idea but the problem was two pronged: the way it was sold and the fact that the policyis not quite what you think it is…

I.  Mis-selling

The fact that PPI was mis-sold to thousands of customers is something that is now causing the banks in the UK, including Scotland, a major financial headache. Their profits are being hit hard as they compensate customers for the mis-selling of PPI. In September 2017, the banks collectively compensated customers just under £300 million.

There are many mis-selling reasons, ranging from telling or implying to customers that the purchase of PPI was compulsory (when it isn't) to the insistence that customers buy the banks' own PPI policy, rather than letting customers shop around for a better deal.

It is this mis-selling that forms the crux of the whole mis-selling saga. It means customers are now claiming compensation, providing they can prove they were mis-sold the policy.

But rather than letting this put you off making a claim, bear in mind that the majority of PPI claims are successful. Even if the bank says no, you can take your claim further. The Financial Services Ombudsman is still finding in favour of the customer rather than the banks, even after all these years.

II.  Not quite what you think it is

Many customers also invested in a policy that was not quite what they thought it was.

For example, many customers were under the impression that it would cover their repayments but, if they had made a claim, it would have only paid the minimum charge on a credit account, for example.

This means that your debt would reduce far slower and, not only this many people did not realise that it only covered payments for a short period of time.

There was also a lot of commission paid to the broker - you can claim that money back too - and the terms and conditions were so narrow it is hard to see who would have been covered by them. But the bank didn't tell you that…

Have a claim for PPI? Could Payment Protection Scotland help? We can help anyone who has a claim for PPI - why not contact us to find out more?