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Scotland Wide PPI Specialists

PPI Scandal – Why Did it Happen?

21 May 2018

Payment protection insurance (PPI) is the most talked about product in the UK, but for all the wrong reasons.

Mis-sold to thousands of customers over many years, when the mis-selling was challenged, no one thought it would develop into such a scandal. To date, billions of pounds have been paid out in compensation by all the banks and building societies in the UK. If you haven't claimed yet, you may be wondering how the PPI scandal started and what it means for you.


A policy designed to protect borrowers

Borrowing money is not without risk to you, the borrower, or to the country. Bad debts can bring a bank to its knees and living in debt is no fun for anyone. PPI was designed to protect the borrower.

If you were unable to work due to ill health, or suffered other kinds of loss of income, then PPIshouldhave made the repayments on the loan which, in theory, protected you from a deepening cycle of debt.

However, it was mis-sold. As a policy, it had narrow terms and conditions that most borrowers were not made aware of. Fuelled by gargantuan profits and hefty commission payments, borrowers were effectively duped in to buying the policy that they didn't need or want.


This mis-selling of an expensive and useless product for many people, carried on unabated until 2005 when the Financial Services Authority took over regulation of the general insurance market. Now known as the Financial Conduct Authority, its predecessor soon realised there were issues with PPI and the way it was being sold.

But it took a complaint raised by the Citizens Advice to the Office of Fair Trading (OFT) to start the ball rolling. The 'super complaint' they submitted consisted of the following four points:

  1. PPI premiums were excessively
  2. PPI offered only partial protection, preventing seemingly reasonable claims
  3. Mis-selling that included high pressure tactics
  4. Slow and unfair claims process when a consumer did have an eligible claim (it took nearly 12 months or more for a claim to be processed)


It took four years of wrangling and arguments before action was finally taken, during which time the banks and lenders continued to sell PPI. The OFT handed the case to the Competition Commission who ruled that the sale of PPI alongside credit products such as credit cards and loans, should be banned.


In August of the following year, the Financial Services Authority decreed that customers who had been mis-sold PPI were eligible from compensation and the process started…


The number of PPI complaints remain high, but there are still many people who do not realise they have a claim. Are you one of them?


PPI compensation claims for policies sold before the summer of 2017 will no longer be valid with a PPI deadline of 29th August 2019 now in place.

Are you certain you were not mis-sold PPI?