The evidence is overwhelming that Payment Protection Insurance (PPI) has been commonly mis-sold over the last decade in the UK. Earlier this year, the PPI scandal came to light and now many leading high street banks have paid out millions in compensation.
PPI is typically designed to safeguard your finances should you fall ill, have an accident or become unemployed. The short term insurance policy will cover repayments on loans or credit cards and possibly even household bills, for a period of up to 12 months.
Whist the financial product itself is not questionable, the way in which it was sold to policyholders was.
PPI was mis-sold to unsuspecting consumers who were not suitable for the product. One of the requirements for many policies is that you are working full time or at least 16 hours a week, if this was not the case at the time of sale, the insurance policy may be invalid.
For example if it was sold to a student, a pensioner or even somebody who was self- employed, the insurance may be of little or no use.
Banks often failed to fully explain the insurance or notify the customer at all that they were paying for it. For years, thousands of pounds had been robbed from consumers who were paying for a policy they did not know they had purchased.
As the issue has gained an increasing amount of publicity, many are now seeking compensation. Banks have paid out large sums to millions of people across the UK as a result.
The Financial Ombudsman Service (FOS) is the regulatory body for dealing with consumer complaints regarding financial products. They have been inundated with a staggering 532,000 PPI complaints in the first six months of the year. In the last two months alone, the FOS has received 3,000 PPI complaints per week.
The average amount of compensation per individual is approximately £2,750. However, this figure varies significantly depending on how much had been paid initially by the customer. In some cases people have been awarded just £200, in others the figure rose to as much as £10,000.
Banks have paid out £557 million in total so far and the figure is expected to rise as more people will claim money back that is rightfully theirs.