Beginning in the late 1990’s, Payment Protection Insurance or PPI’ policies were sold along with mortgages, loans and credit cards, in order to pay off the amount owed if a borrower ever became sick or lost their job.
And while in theory, PPI is a smart investment, a widespread scandal regarding the mis-selling of PPI in the UK affected millions and became one of the top three scandals in UK financial market history.
It was discovered that banks were selling ineffective, but extremely profitable PPI policies to unknowing customers and that they has been doing so, for over a decade.
After thorough investigation, it was claimed that the PPI polices being sold by Britain’s banks were:
- Expensive: with premiums adding 20% and at times even 50% to the total cost of the loan.
- Ineffective: often structured to reduce the possibility of a payout for a legitimately ill individual.
- Mis-sold: PPI sold without the customer being aware of the charges, sold as an “essential” fee, or sold to an individual that would never be able to claim (someone un-employed or self-employed).
At the end of 2005, the Financial Services Authority (FSA) contacted the heads of Britain’s banks to discuss the pressing issue and from then on, the FSA began to impose fines for the mis-selling of PPI against companies like:
- Regency Mortgage Corporation: for selling PPI to customers who would not be able to claim.
- Liverpool Victoria Banking Services: for adding PPI to customers’ loans without their consent.
- Alliance and Leicester: for training their staff to pressure on their customers.
The scandal quickly escalated in 2008 when it was reported that a shocking 1 in 3 PPI policy holders had been mis-sold PPI.
Where are we now?
Since the scandal surfaced, more than 4.5 million people have made claims over mis-sold PPI and of those 4.5 million, 2.5 million have been paid.
In fact, the average payout received was £3000 (although some have been significantly higher) and PPI claims companies have made around £875 million (based on a 25% fee).
So if you have taken out any kind of loan in the past decade, look into your policy for you may be able to make a claim and get some of your hard earned money back.
And yet, despite the complete lack of trust that the PPI scandal has created as a result of banks ignoring the needs of their customers in exchange for high profits, there is an upside to the whole ordeal.
As more and more people file PPI claims, the economy experiences positive growth.
The compensation that customers are receiving is providing them with much needed money and with so many claims coming in, jobs are being created to help tackle all of the PPI claims. And with an economy in great need of jobs, in a way, the timing is ideal.
Hopefully with time, some of the trust lost will return and with people receiving payouts and the new FSA approved set of standards for selling PPI instilled, the country is well on its way.
If you think you may be entitled to a claim, contact PPI Claims Company today and start on the road to financial recovery.