What Is PPI And Why Was It Mis-Sold?
Many lending institutions were involved in the mis-selling of payment protection insurance in UK and as such were ordered to refund the affected borrowers. Let us try to learn what PPI is and what circumstances led it to be classified as mis-sold insurance.
What is PPI?
PPI stands for payment protection insurance. This is a kind of protection against non-payment for lending products such as credit cards, mortgage payments, loan payments and other borrowing. The purpose of this type of insurance is to protect the debtor and creditor in case the debtor fails to pay the debt due to accident, sickness or unemployment issues. The insurance company pays the monthly installment and saves the debtor as well as creditor.
Why was PPI mis-sold?
Although PPIs’ purpose is very useful but there were many cases the policies were mis-sold in the UK. Payment protection insurance is regarded as being mis-sold under the following conditions:
- The premium for the PPI insurance is added to the loan without the borrower’s knowledge.
- The borrowers are led to think that PPI is a requirement for loan, credit card or debt approval.
- The lenders and insurers do not explain to the borrower the terms and conditions of the insurance.
- The borrower is medically exempt when the insurance was sold.
- The borrower is either unemployed or self-employed when the insurance is procured.
Are all PPI policies mis-sold?
Not all of the PPI policies are mis-sold. For some, this is a valuable kind of insurance that enables the borrowers to service the debt even when unfortunate circumstances happen. Because of the scandal on the mis-selling of PPIs that affected millions of borrowers, lenders were ordered to refund the borrowers for mis-sold insurance.
Eligibility to claim PPI
Even if your account had been subjected to an add-on insurance known as PPI, there are some conditions to be satisfied to warrant the refund.
- You can claim the insurance refund even if the loan had been closed under the condition that the account had been active within the last 6 years.
- If your PPI had been fully paid, your account needs to be active in the last 6 years.
Borrowers who were not informed about the PPI and were forced to buy it can claim for the refund independently or with the help of a claims management company. The latter option is suitable for most people as it often provides maximum refund in the shortest possible time.