23 March 2015
The question on everybody's lips is how much more can the banking industry in the UK take from the PPI mis-selling scandal. As the PPI compensation pots of banks and lenders in the UK now collectively stand at £22 billion, industry analysts think that this could be surpassed, with £26 billion being the new estimated figure for PPI compensation.
PPI was designed to protect you if you were unable to make repayments on loans, credit cards etc. There was also a mortgage PPI product which some people were duped in to buying on the biggest loan they would ever enter into, their mortgage.
But, although the product may have been useful in a small minority of cases, the way in which it was sold was unfair.
No one likes to be in debt and when there are issues with income, this debt can become a heavier burden to carry. Just as you get cash in to your account, you find it has gone again to pay towards the debt. In this sense, people feel they get nowhere.
And so it seemed to obvious thing to do, to buy a product that promised or guaranteed to make these repayments, should you be unable to do so.
But, this PPI product made the debt a heavier burden too, and here's why:
The premiums added a considerable cost to the loan each month; in some cases, such as credit cards, it was calculated as a percentage figure of the amount of money owing on the credit card each month. This added an extra lump on top of the amount being paid.
The addition of the PPI premium to a payment each month not only made it more expensive, but in some cases it could also add costs and fees to your account; the addition of a monthly premium pushed many customers over their credit limits, thus they were charged for exceeding their agreement limit. As part of your PPI compensation, you should get this back too.
Single premium policies were those were sold with one premium being charged to a customer; effectively you paid for the policy upfront but, what many people found was that when they asked to cancel the policy and have a refund (especially at the start of the whole PPI debacle), that they were told they were not entitled to claim a refund.
The other issue with the PPI policy that made it a heavier burden, was that very often, the policy only related to one account holder, even though the loan may have been in joint names. This meant that when people tried to claim on the policy, that they were told it covered the other account holder only.