What is PPI or Payment Protection Insurance?
PPI has been very confusing for consumers, with many not sure what it was or whether they actually have it. PPI is designed to cover loan or credit card debt repayments in the event of unforeseen problems e.g. if someone becomes ill or loses their job. These policies are often sold as part of the credit deal when you take out a loan, mortgage or credit card.
Why are PPI policies and how they were sold suddenly important?
In April 2011, the UK’s banks lost an attempt to prevent new regulations on how they should sell PPI which also covered how they were sold over the last 6 years.
Whilst not all PPI policies were mis-sold some Banks and other lenders sold PPI to their customers without fully explaining what it covered. In some cases the banks and lenders lied to customers telling them that it was a compulsory part of a loan or credit card, or they simply added it without the customer's knowledge or consent.
The British Bankers Association (BBA) announced in May 2011 that it will not be appealing against a High Court ruling that the Financial Services Authority (FSA) sought to impose tougher rules on the past, present and future mis-selling of PPI policies. It is estimated that the banks could be liable for a combined sum of approximately £9 billion in compensation as a result. Obviously this figure depends on how many people come forward with a complaint. So, if you've had a PPI policy in the last six years and believe it was mis-sold to you then you could very well be entitled to a refund.
How do I know if I have a PPI policy?
Whilst the new rules suggest the banks and lenders will have to contact all past PPI policy customers there is no guarantee they will do so. Therefore the best thing to do if you've had a loan or a credit card in the last six years is to check your agreement to see if there is a PPI policy attached to it. Don't just rely on looking at your statement either as often the PPI payments are front-loaded at the start of the repayments.
If you can't find your original loan or credit card agreement then you can contact your bank or lender and they are legally obliged to send you copies of your agreement, although some may charge you a small admin fee (no more than £10 maximum). Here is a list of banks and lenders contact details for PPI's.
