Home > Life Insurance > The Great Payment Protection Scam

The Great Payment Protection Scam

By: J.A.J Aaronson - Updated: 23 Sep 2012 | comments*Discuss
Payment Protection Insurance Payment

Payment Protection Insurance (PPI) has been the basis for one of the most significant consumer rebellions in recent years. The Competition Commission has come to a landmark verdict that vindicates those who maintained that PPI was being unfairly marketed and mis-sold. However, many people are still unaware of the dangers of PPI, and many more do not realise that they may be entitled to a significant refund.

Purpose of PPI

Payment Protection Insurance is marketed as a way of protecting yourself in the event that you become too ill to work, or lose your job. It has relevance to those making a will, because some insurers sold PPI on the basis that it would offer cover in the event of their death. The purpose of the insurance is to pay off your debts if you cannot work or, in some cases, if you die.

PPI pays out all or part of you minimum monthly repayments if one of these events were to occur. It has become increasingly popular as the economic downturn has worsened, with many people worrying about how they would pay off their debts if they were made redundant.

However, it is not the benefits of PPI in and of themselves that are up for debate. Rather, it is the way in which the product has been sold.

Unfair Selling Practices

Tens of thousands of consumers have been the victim of mis-selling by unscrupulous loan companies whose salespeople have pushed PPI on them, either when it is unnecessary or, in the worst cases, against their clearly expressed will. Amongst this list of unscrupulous companies can be found some of Europe's biggest financial names, including Egg, who were handed a record £30 million fine in December 2008 as a result of their PPI practices.

Customers have been subjected to extreme pressure by salespeople who have frequently insisted that they take out PPI. Often, these individuals have said that the customer can only have the loan if they take out the insurance – even if the loan has already been approved. Similarly, the combined premium is often added to the total balance of the loan, meaning that every monthly repayment is inflated.

Competition Commission Findings

More recently, the Competition Commission has ruled that lenders may not sell PPI until at least seven days after the loan has been granted. This has angered lenders, who frequently make a bigger profit on the insurance than they do on the loan itself.

If you have taken out a loan or credit card in the last few years there is a high likelihood that you were offered Payment Protection Insurance. You may have taken it as a result of a desire to safeguard yourself, or because of undue pressure from a salesperson. In either case, you may well be entitled to a refund and compensation.

The result of the Competition Commission report, along with earlier Financial Services Authority rulings, seems to make a class action against PPI vendors likely, or at least possible. In the meantime, you should make clear to your lender that you wish to be refunded. Most are currently complying with their customers' demands.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

(never shown)
(never shown)
(never shown)
(never shown)
Enter word:
Latest Comments
  • Ray Delta
    Re: Debt After Death
    My partner passed away in February 2019 leaving no estate assets or monies, she had a vehicle on a lease hire agreement with an £8,800. now owing.…
    7 July 2019
  • Geoff
    Re: Divorce and Revoking a Will
    Three years ago when my wife, now deceased, was in a nursing home I had a will written that left everything to my wife's great…
    4 July 2019
  • Tonyn
    Re: How Legally Binding is a Will?
    My wife’s mother has dementia and some of her family don’t want nothing to do with her now and no longer visit her, and they…
    10 June 2019
  • John25
    Re: How Legally Binding is a Will?
    I made the mistake of removing the staple from a will to produce a copy for a beneficiary. What are the usual consequences and…
    16 April 2019
  • Butler
    Re: Life Estates
    My father has just died and I always thought he owned his property as I found deeds etc but now have found paperwork indicating it is owned by a…
    13 November 2018
  • Sue
    Re: Life Estates
    In my mums will she expressed the wish for her partner to be a life tenant. It also states that we must allow him to move house as often as he wishes.…
    5 October 2018
  • giblet
    Re: How Legally Binding is a Will?
    My wife has just passed away and we have found a will we didn't know existed. It leaves various bits and bobs but also leaves…
    30 September 2018
  • Solly
    Re: Why Make a Will?
    I just read what I said and I meant to say if you are the witness to the signing of the will. If a person is living as if they are the…
    5 September 2018
  • Solly
    Re: Why Make a Will?
    I have read that if you are the spouse or civil partner of a beneficiary of a will, the beneficiary may not receive anything from the estate. What…
    5 September 2018
  • TheWillExpert
    Re: How Legally Binding is a Will?
    John - Your Question:Is the validity of a will only governed by the signatures of witnesses, or has it to be registered…
    8 August 2018