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Types of Payment Protection Insurance
The mis-selling has been so widespread, that the Financial Services Authority (FSA) began to investigate the market in its entirety. The conclusion of many months of mystery shopping and other investigations, led the FSA to refer the matter the UK Competition Commission.
The findings were that there was a high risk of mis-selling at the point of sale. The 3 areas that are affected include:
Personal Loan – Payment Protection Insurance
The largest of all the complaints we handle come from clients that have been mis-sold payment protection on a high street bank loan. A typical customer wanted to borrow some money for numerous reasons, a new car, kitchen or a family holiday.
The banks were more than happy to lend this money to the client. During the discussion, whether face to face or over the phone, then the banks usually dropped into the conversation ‘would you like to insure you loan, to give you peace of mind?’
Well, why not?
What usually happened was that the deal was done without explaining the costs (usually 25% of the cost of the loan) plus associated interest applied on top. This resulted in an increase of 30% on the cost of a loan. A typical £10,000 loan would have become £3000 more expensive to the client. A very profitable business for the bank. It has been estimated that the costs of the insurance was around £20.
High pressure sales tactics were also not uncommon. The salespersons were clearly on a bonus to sell this insurance, so the chances of mis-selling were high. It was not untypical to hear the words from the salesperson -
‘Well I am afraid without the insurance – we would be unable to offer you the loan’
This was untrue and it usually sealed the insurance sale for the bank and the employee.
The nature of all insurance sales is that the policy should be sold in a certain way. Insurance is a very complex product and the client’s demands and needs should be met in a way which renders the policy useful. The bottom line with regards to the insurance is that most people, who tried to claim, were fobbed off with clever talk and small print exclusions. You can see more on this type of comment here
Credit Card – Payment Protection Insurance
Credit cards provided another opportunity to sell payment protection insurance to clients. The insurance was called many names, including
Many lenders had an array of different products. Some credit card providers have charged 3 different types of insurance to one card! The costs were phenomenal. A £10,000 balance would have incurred a charge of £140 per month. The Minimum payment was excluded from this number. Small balances of £2000 would see charges in the region of £20 per month.
The credit card providers usually sold the insurance with the application form. These could have been sold in branch, a shopping centre or over a phone. The application usually asked – would you like to protect your repayments? There was little literature on the costs and exclusions. Most people may have been inadvertently sold something that they didn’t understand. The basics were nearly always missed.
Again, if you feel you were mis-sold PPI on a credit card, then contact us today. The chances of a refund are high. We have had many instances of claims achieving over £10,000.
Debt Consolidation Mortgages (Secured Loans)
This was the premium of all premiums. Potentially very profitable for a broker, people who consolidated debts, or were subject to any type of financial hardship may have taken out a secured loan. The loans ranged from £20000 to £100,000. The premiums ranged from £5000 to a £25000 premium.
This insurance is possibly the worst example of mis-selling ever. The premium was paid upfront (secured on a property by the way of a second charge) and paid back over 25 years. That is the capital and the interest. A big problem was evident. The insurance lasted 5 years; the loan usually lasted 25 years.
A £100,000 loan would have resulted in a £25,000 premium. If you took out 5 premiums to cover you over the life of the loan, the insurance costs more than the loan. This is not insurance, this is nothing more than a scam.
If you have had a secured loan with payment protection, then contact us today. These policies are the worst of them all and you should action your complaint as soon as possible.
PPI still mis-sold, says Which?
Many people are still being misled into buying payment protection insurance (PPI) to cover their credit card payments, Which? claims.
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PPI complaints 'could run into tens
of thousands'
Finance Daily (19 February) looks at new research arguing that the PPI claims market clampdown could still cost the consumer as banks try to compensate for their losses
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