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PPI policies have been sold with mortgages, loans and credit cards since the ‘90’s. They were originally designed to repay monthly repayments if the policy holder fell ill or lost their job.

There have been countless critics of PPI and the aggressive sales techniques, even from the very beginning. The complaints began to become more mainstream during the noughties – in 2004 for example, it became common knowledge that the banks were returning only 15% of their PPI income to policy holders that claimed, which meant it made the product much more profitable than car or home insurance. It was also revealed that parts of the Lloyds group and Barclays were hauling in massive profits; an investigation was then started.

In 2005, Citizens Advice began an investigation and labelled PPI nothing more than a ‘protection racket’.

The investigation outlined four charges:

  • The Expense – premiums often added 20 – 50% on the cost of a loan.
  • Ineffective – the way PPI was structured meant that claimants were severely limited when attempting to make a genuine claim.
  • Widespread mis-selling – most policies were sold using underhand sales tactics; in some cases it was sold without the policy holders knowledge.
  • Inefficient – claimants faced long delays and complex claims procedures.

In 2006, the Financial Services Authority began imposing fines for the mis-selling. The FSA also banned one of the most controversial PPI policies – known as the single premium – which was sold to mortgage customers and added to the total of their loan.

The PPI scandal began to reach mainstream attention in 2008, after Which? reported that one in three PPI customers had been sold an insurance that wasn’t applicable to their circumstances.

Thus far banks and lenders have shelled out nearly £30bn to those mis-sold – this figure is much bigger than anyone had ever predicted, and was initially forecast to last only 18 months.