Learning About PPI Claims and the Scandal Behind Them
There have been a lot of PPI claims coming in from consumers who have been mis-sold the product during the time of applying for credit or a loan. A lot of people are finding out that their mortgages, loans and credit cards have additional charges that they weren’t made aware of. This is due to payment protection insurance that was added onto their loan without their knowing. Payment protection insurance, or PPI, is a product that is available to borrowers to help safeguard them and the lender from default payments. Unfortunately, there’s been a lot of consumers who have been mis-sold this product, tacking it onto their debt without their consent. Over the past couple of year, borrowers have been made aware about this fraudulent tactics and are filing PPI claims to recoup what they’ve lost.
How Lenders Bamboozled Borrowers with Mis-Sold PPIs
Mortgage companies, credit card companies and other lenders have been mis-selling payment protection insurance to consumers in order to get paid higher commissions. It was also a way to protect their investment in a borrower who may end up defaulting due to a lay off at work or other financial emergency.
The way that PPI works is by paying for the minimum loan payments each month for a designated time (in most cases 12 months). This gives the borrower time to regain their composure and start making payments on the debt. The lender gets to protect their asset and make a profit from it at the same time.
Millions of people in the United Kingdom were mis-sold payment protection insurance. In the summer of 2008, there were 20 million PPI policies in the UK alone. Around 7 million PPI policies were sold every year, quickly adding up the grand total. This was good for the insurance industry, but majority of the policies that were written were done so fraudulently. According to the PPI claims that started coming in, about 40% of the PPI policyholders were unaware that they had coverage.
The fraudulent acts of financial institutions that were mis-selling payment protection insurance had been overlooked for over a decade. Even third-party brokers were getting away with murder. When the word started getting out, investigations of the PPI claims were being done. About £400 million in policies were sold by High Street Bank alone, earning them a whopping 80% of that total in profits. The reason for the high sales was because the banks encouraged the salesman to sell more policies and promised them high commissions for doing so. Unfortunately, this ended up causing salesmen to conjure up different ways to get PPI included in loans – at any cost. This included telling borrowers that payment protection insurance was mandatory or was needed to help get approval for the funds.
Guilty Lenders and How Much they Ripped Off Consumers
The amount of money that was ripped off from consumers is in the millions. Lenders like Egg, Capital One and HFC were all guilty of mis-selling payment protection insurance, resulting in a £1.1 million fine. Alliance and Leicester is another guilty lender that was fined £7 million. As more and more PPI claims surface, the more details that are being released about which lenders are guilty and how much they have to pay back to consumers. About 30% of the cases that were coming in were for PPI claims.
The amount of money that consumers were robbed of depends on the size of their loan and whether they completed the loan or still have debt left. When payment protection insurance is obtained, the borrower will have to pay between 16 and 25 percent of the loan amount, as the premium. This can either be paid on a monthly basis or in a lump sum upfront, using another loan. If this latter is chosen, the borrower will have to endure interest from the lump sum loan (between 13% and 56%) and the original loan that was taken out. When PPI claims are filed, the borrower is entitled for repayment of the loan and the interest that was imposed on them.
When it comes to credit card companies that have mis-sold payment protection insurance, the premium is based on the unpaid balances that rollover each month. So if the debtor doesn’t pay the full balance each month, interest is accrued for .78% and 1% of the past-due balance. This goes on top of the interest rate that the credit card company charges.
Filing PPI Claims to Recoup Money
In order to recoup all of the money that was lost in order to recoup all of the money that was lost as a result of miss-selling, consumers who have learned that they been duped into this coverage are filing PPI claims. The process can be done by contacting the bank and having them investigate the claim. This is done free of charge by the bank. It’s important to watch out for entities that are charging consumers for filing PPI claims. A lot of them are ripping people off with extremely high fees.
When a person files a PPI claim and has already paid off the loan, the bank will have to repay the borrower the amount of the payment protection insurance, along with statutory interest. If the loan has yet to be paid off in full, the bank is required to pay back what has already been paid for on the premium, along with interest. The bank will also have to cancel the policy, so that no more payments are made towards it.
Preventing this in the Future
As of April 6, 2011, payment protection insurance was placed under an investigation order that was issued by the Competition Commission. This protects consumers by requiring them to be fully aware of PPI before it’s added to their loan. It states that lenders will have to provide borrowers with an accurate quote for payment protection insurance. The policy can’t be added to the loan at the time the borrower enters into the credit agreement. This process will ensure that consumers are able to make informed decisions when shopping for credit and loans.