Bad advice in finance can have a devastating impact on people.
This is a campaign for real change

Payment Protection Insurance sold with loans

In the United Kingdom, Payment Protection Insurance (PPI) was a product that was sold on the basis that it would protect a borrower’s ability to repay loans. PPI was generally sold alongside credit, including mortgages, credit cards and other unsecured loans by all the main UK banks since the 1990s. The insurance would cover repayments on loans when a customer fell ill, became unemployed, or in case of an accident.

However, there were significant problems with PPI in the United Kingdom.Any attention as to the suitability of the product for the consumer in question was often minimal, if it existed at all, andPPI policies were frequently mis-sold to consumers who would never be able to claim it. PPI policies were also not sought out by consumers, and there were many cases where consumers were not even aware that they were sold the insurance.

Consumers were also often incorrectly led to believe that taking out the PPI was a condition in order to be granted the loan. In sales connected to loans, PPI policies were often promoted by commission-based sales people who were incentivised to sell the product, regardless of whether it was appropriate. If the consumer repaid the loan early and needed to cancel the insurance, little or no refund was given.

Research carried out by the Office of Fair Trading into the cost of PPI found that, between 2003 and 2006, 42% of the policies sold had a commission worth more than 50% of the product’s price. Among those policies, the average of the commission vis-à-vis the price of the product was 67%.

In 2011, the UK banking industry lost a legal challenge against the UK regulator, and banks were required to pay redress to consumers. By January 2016, £24.2bn has been paid out to consumers. Total amounts set aside by banks for PPI redress now stands at £43.5 billion – around 4.5 times the cost of the London 2012 Olympics. In an effort to draw a line under the scandal, the Financial Conduct Authority set a final deadline for filing a PPI complaint of 29 August 2019.