| PPI, PPI Scandal

Why Is the PPI Scandal Continuing


It is near impossible not to know about the Payment Protection Insurance (PPI) scandal. For those who do not know what PPI policy is for here is a brief introduction.

PPI policies are sold alongside loans, mortgages and credit cards since the 1990s. These policies were meant to provide cover for people who failed to repay their debts or borrowings because of any one of the following reasons:

  • Illness
  • Unemployment
  • Death

The banks or the lenders did not profit much as the PPI policy did not bring in any cash from the consumers. Therefore, they started selling the policy to anyone and everyone without checking if in future their customers are eligible of making a claim or not. PPI policies were mis-sold to people in various ways for example, the banks or the lenders forced their customers to buy it (without explaining them much about the policy) or by selling their customers the policy without their consent.

Customers who did not know if they had any such policy in their name, did not make a claim. This made huge profits for the banks and the lenders. In the beginning of the 2005, the Financial Service Authority (FCA) made it a priority to draw a line in the sand to the whole PPI mis-selling scandal. The FCA then started imposing fines for mis-selling of PPI polices in 2006. The authorities even banned one of the worst types of PPI policy that was being sold at the time – single premium which was sold to mortgage buyers and then added to their total loan amount at the start.

As the issues of mis-selling of PPI policy started to arise, an army of consumers attempted to make a claim for compensation. The successful claims were based on the following factors

  • Proof that the claimant was/is unemployed.
  • When the policy was bought
  • Whether the banks provided correct paperwork or not.

Most banks rejected almost all the compensation claims forcing the customers to take their case to the industry ombudsman.

Till today, PPI is by far the biggest source of complaints to the FCA and more than 70%  of claims being brought forward are being upheld in favour of the claimants. It is a fact that PPI is such an outlier when it comes to the proportion of cases that are being upheld. However, the banks are still failing to deal with the issue properly, years after it was first brought to light.

Finally, the FCA has announced a deadline on making a reclaim on the mis-sold PPI policies. According to the FCA, imposing the deadline should put the PPI issue to an end. It is now a relief that the Financial Conduct Authority (FCA) has published final rules and guidance on the future conduct of the claims.

FCA has a hope that the advertising campaign for the announced deadline will encourage people to come forward with their PPI claims and not delay it any further. The mis-sold PPI refund claim should be made before the final deadline i.e. August 2019. Mainly, it was important to bring this issue to an orderly close by imposing a two-year deadline on consumers within which they should make a claim or risk losing out on compensation that is rightfully owed to them.


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