Criticisms of PPI
1998 and a report from respected consumer organisation ‘Which?’ highlight payment protection insurance (PPI) as being expensive and ineffectual. It draws attention to a product that would become infamous as the product that brought the British banking industry to its knees.
But it wasn’t until 2011, 13 years after this initial report was published, that PPI compensation would start to flow back to customers. Even though in the intervening years, firms and banks were fined for mis-selling of PPI and so on, it took years of arguments and judicial reviews before the banks came to the same conclusions as everyone else – PPI was and had been mis-sold on a gargantuan scale and customers were entitled to their money back.
Four major criticisms
In 2011, the four-fold criticisms of PPI were highlighted in parliament by Vince Cable. Reports and research by ‘Which?’ and other groups presented four key findings to their criticism of PPI, all of which are being echoed time and time again with compensation claims;
PPI added to the cost of the loan, in most cases by 20%. There were some cases of loans in which PPI double the cost. This expensive addition to a loan meant that many people soon struggled to repay the loan that they had opted for.
In many cases, fees and costs were also added to the loan when PPI premiums pushed people over their agreed credit limit.
Insurance products are meant to offer peace of mind to customers that they have major events in their lives covered by a financial product. For example, home insurance in the case of burglary or fire.
Although we expect these policies to have terms and conditions, we expect them to be fair. It was found that in the case of PPI, it was structures in a way to limit the chances of someone making a claim.
There are many reasons why PPI was mis-sold to customers but the one that was highlighted in parliament back in 2011 was that customers were being told that PPI was “essential”. In other words, people were told that it was compulsory or given the impression that it was.
Customers were also given the impression or even told that their application for credit stood a better chance if they took out the policy alongside their loan.
For those who did attempt to claim on their PPI policy in the case of genuine illness, they found a process littered with lengthy delays and complicated forms.
In other words, it was incredibly difficult to make a claim on PPI and with only 15% of claims being successful, it gives you a clearer picture of how poor a product PPI was. Was it sold to you?