Unnecessary and excessively-priced Payment Protection Insurance (PPI) has been packaged alongside credit cards, loans, mortgages and car financing by banks, lenders and brokers for the last 20 years. The main problem with PPI was its sneaky inclusion without consumer awareness, accounting for £89 in every £100 of pure profit! Policies were often sold by un-trained sales staff, propelled by the likelihood of commissions. This devious incentive increased the recruitment of new customers who paid for worthless, costly coverage at the sake of another’s financial gain.
PPI became the most protested product ever when complaint figures from the Financial Ombudsman Service (FOS) show payment protection insurance accounted for 60% of its workload in the past year. The uphold rate for reviewed cases by the FOS is around 90%.
If you’re a consumer with a loan, credit card or mortgage over the last six years then your bank account may still be releasing hidden payments for unwarranted PPI. A survey of forty-eight major lenders found the price of PPI was 16-25% of the amount of the debt. The cost of PPI for a standard UK credit card charged 19.32% rate, on an average of £5,000 each month; adding an extra £3,219.88 in premiums and interest.
The first ever PPI case was a Bristol hearing in 1992, that spanned an additional two years. The case won in favour of the plaintiff after figures had demonstrated the total PPI premiums were nearly as high as the total benefit that could be claimed under the coverage. Because of a non-disclosure agreement, a copy of the judgement had not been released to the FOS or the Citizens Advice Bureau (CAB) until 10 years later. Soon after, CAB launched a Super Complaint into what it called the “Protection Racket,” and led to a judicial review that granted reprieve to the conned consumer.
Banks, lenders and insurers were ordered look into all PPI policies they have sold as part of a High Court ruling in May 2011. In addition, the High Court judge demanded that all previous payouts must be reviewed for any under-settlements. If a policy was found to be mis-sold, refunds were required to all payments made.
In July 2012, all major UK banks were required to set aside almost £10 BILLION in mis-sold, PPI refunds. Take a look at the startling figures:
Lloyds Bank set aside £3.6 BILLION
HSBC have provisions of £745 MILLION
RBS set aside £850 MILLION for PPI claims
Barclays set aside £1 BILLION for PPI claims
Santander set aside £538 MILLION for PPI claims
Halifax £3.2 BILLION for PPI
The largest PPI consumer claim refund was a whopping £52,851 settlement! Additionally, £11 million was the total amount that the Financial Services Authority (FSA) issued in fines to UK lenders. Even more shocking, £4.3 billion was the average profit made each year by UK lenders from PPI policies.
The intent of PPI was initially released as a pro-consumer, insurance product. Its premiering incentive was to offer consumers an option to insure repayment of loans if the borrower was faced with any of the following losses: death, disability and unemployment. Payment Protection Insurance can be extremely useful insurance in some circumstances, but the terms should be reasonable at the discretion of consumer awareness.
Over 1 million people have already made a PPI claim. You could be owed more than you think; average customers may have as many as four mis-sold PPI policies hidden among various forms of credit arrangements. The average PPI refund is £3,000. For additional data, review the following PPI infographic, and feel free to share it around.