Tuesday, June 21, 2016
Payment protection insurance, which also goes by the name of credit insurance and credit protection insurance, has become a large topic of focus in the British banking world and has spawned the result of millions of British Citizens making PPI Claims.
In the 1990s, this came about. The aim of this was to protect consumers who took out loans, mortgages and credit cards.
With this, should borrowers become unable to pay their debts do to unforeseen circumstances, such as the loss of a job or the inability to work because of illness or injury, deposits would still be made on those debts that were covered by the policy.
While the idea behind the it seems like one that has borrowers’ interests at heart, several banks that issued this only had their own best interest in mind and not their customers. Thus, the huge scandal that surrounded it unfolded.
PPI Claims The Neverending Scandal
The intended purpose of these policies is to protect those who borrow money from banks in the form of car loans, personal loans, mortgages and credit cards.
The customer pays in and, in the event that the customer falls into financial troubles, the coverage would step into to cover the repayment of those debts.
The customer pays the policy, but upon filing a claim, the company that provides the policy takes over deposits on the loan that the insurance is covering.
Typically, this covers:
Minimum payments on debts
Offers coverage of payments on debts for a predetermined period of time – often a period of 12 months
Once the predetermined period of time expires, should the borrower still require financial assistance for making the deposits on their debts, the borrower will no longer be covered and must make other financial arrangements.
PPI Claims Eligibility
While this may seem like an excellent way to protect a borrower, there are actually some pretty stiff stipulations associated with this insurance in order to guarantee eligibility. In order to be eligible, a consumer must:
- Be between the ages of 18 and 64
- Must be employed full time at the time of applying.
- Must not have a pre-existing medical condition
- Must not be self-employed.
- Must be employed by a reputable company that has not given any indication that a future job loss or cut in pay is a possibility
- Must be in good financial standing and must not have defaulted on any previous loans
Since these guidelines for receiving coverage are so stringent, this type of cover is not suitable for all people.
About the Mis-Selling of PPI Claims Policies
While the there are many stipulations that indicate the eligibility for coverage, it actually turned out that many people were never able to receive the benefits that this offered.
As a result, it turned out that banks were making record profits, thanks to the sale of this. Because such huge profits were reported, banks wanted to continue to cash in and in order to do so, they began mis-selling and opened the door to ppi claims.
When a customer is not made fully aware of the terms and conditions, yet purchased it anyway, they were mis-sold this insurance. In addition, many consumers who were taking out loans, mortgages or credit cards also purchased this coverage without being informed.
How the PPI Claims Scandal Unfolded
Many consumers became aware that they were mis-sold when they went to file a request for compensation.
Upon filing ppi claims, consumers who were not informed of the details regarding eligibility found that they were not covered and the coverage that they purchased did not protect them.
Those who were sold the policy without being told also began to discover that they were making payments on an policy that they never even knew they purchased.
In the financial industry, making a ppi claims refund typically means reporting that an incident occurred that warrants the coverage. For example, in the case of car insurance, if a person gets into an accident, filing for the accident means that the car insurance will provide coverage for damages and medical bills that are associated with that accident.
When a person becomes unemployed or ill and unable to make his or her payments on the debts associate with the loan that the policy covers, the agency that provided the coverage should come into play and make payments.
Since this ppi claims mis-selling scandal actually did not provide the coverage that those who were affected thought it would, these people began asking for ppi claims compensation. Instead of filing requests to receive the benefits offered by their coverage, people began filing reclaim requests against the banks that mis-sold these schemes.
Since so many people were mis-sold, the banks that were at the root of the ppi claims scandal have had to pay back literally billions.
In fact, the ppi claims scandal became so large and so many mis-sold policies were being made, the banks that were associated with the scandal have put aside an estimated total of £14 billion pounds in order to cover the reimbursement of the mis-sold ppi claims policies.
The Future Of PPI Claims
The ppi claims scandal of this has actually been in the news for some time. It first began making headlines in 2005. However, while it has been 8 years since the scandal gained public recognition, it was so great that it is going to take a very long time to for all mis-sold ppi claims to be filed. It is also going to take a long time for all mis-sold ppi claims policies to be reimbursed.
This is still offered as a way to protect consumers who take out mortgages, loans and credit cards; however, given the nature of the scandal, the procedures for applying for and receiving such cover have become much stricter and are now monitored very closely.
Today’s tough economic conditions often make it necessary for people to take out a huge loan or even mortgage some their assets to get the necessary funds for other immediate needs.
However, more often than not, the burden of taking a loan is accompanied by the greater burden of ensuring its timely repayment.
This is a scheme designed to help customers to insure the 100% return of loans in case the borrower is incapable of returning the money due to various reasons, including death, disability, illness or even unemployment of the borrower.
This product is generally offered as a part of the deal to customers seeking a loan from a bank or other credit providing organizations.
However, it is advisable for the consumers to first establish whether or not they really need a policy along with their loan as these can turn out to be quite expensive. It can prove to be a big financial burden and might not be affordable for everyone.
Taking out a policy ensures great peace of mind, when the borrowers are already struggling with their finances.
People can use the money to cover their household expenses especially when they are incapable of having a regular income.
PPI Claims & How To Get Your Money Back
Since the money received from the bank are free from all taxes, the policy holders can get the entire amount which can prove highly beneficial.
In the recent years there has been a significant rise in ppi claims, not only by various private money lending institutions but also by a majority of banks.
In most cases the customers were either unaware that they were being sold a policy or were forced to take out the policy to get the loan sanctioned. According to a survey, most such customers were not only unaware of the existence of such policy but also did not ask for it or even have any real need for the same.
There have also been other complaints, where the customers complaints to not have been informed about the policy but not sufficiently enough to make them understand its necessity or even how it worked and how they would benefit from the same.
In such cases, the customers often ended up buying the policies without actually evaluating whether or not it would suit them or would not create further financial stress for them.
In view of the increasing complaints banks such as Natwest, Lloyds TSB, Santander, Egg, Nationwide, Halifax, MBNA, Yorkshire Bank, HSBC, Barclays and insurance firms like Direct Line – have been facing severe criticism.
The policy was originally designed as a method of protecting people truly incapable of repaying the loans due to various reasons. But sadly, today, it has been developed into a tool to earn greater profits by the various financial institutions and result in ppi claims.
This is not only affecting the validity of the coverage but also making many people who need are in genuine need of help avoid seeking ppi claims refunds for the fear of being drawn into a long and messy dispute.
An Approximate Total Value Of PPI Claims Mis-selling
The extent of misuse of these insurance policies by banks and other financial institutions can be ascertained from the fact that in the UK alone, banks were penalized to pay a sum of £4.5 billion to customers who were mis-sold the policy and are eligible for ppi claims.
A major UK bank is believed to have made a profit margin of no less than 80% by selling ppi claims policies worth £400m to its customers as a part of their various financial products.
In another similar incident, Alliance and Leicester, a major financial institution was fined £7m for being a part of the ppi claims mis-selling conspiracy.
Many experts believe that what led banks and other financial institutions misuse the policy to this extent was not only the desire of earning easy profits but also sustaining their own financial security.
This is why they used every means to convince and in some cases even coerce people to buy the insurance despite being aware that most of the customers would actually not need them.
In their zealousness to sell the policy to a greater number of customers the financial institutions even overlooked the pre-defined conditions for the sale, which often left the borrowers haggling at the time of making PPI Claims.
Not Becoming A Victim Of PPI Claims Mis-Selling
Customers seeking a loan need to be extremely careful and well aware so as not to become a victim of PPI Claims mis-selling.
This is especially true for people with limited resources for PPI Claims.
Given below are some guidelines that prospective loan seekers can follow to prevent from being sold the policy in a wrong manner.
The Lowdown On PPI Claims
It is extremely important that people buying any financial product check and cross-check the documents to learn whether or not they would also be expected to buy a policy.
Most people make the mistake of not going through the details provided in fine print on the documents as this is generally the place where all important details such as the clauses of the loan agreement, hidden costs and referrals are placed.
In case the financial institution offers prospective customers with the option of buying a policy, they should seek some time to gain further knowledge about the details of the policy, in addition to its cost, premium amount and the other benefits that it would offer.
It is also advisable to gain information about the pre-defined clauses for making these PPI claims compensation requests as the policies do not cover all disabilities and unemployment types.
In case the loan seekers have any doubts about the policy guidelines or even their relevance with respect to the financial product they intend to buy, it is always advisable to pester the concerned person until they provide a satisfactory answer, before seeking ppi claims.
Buying a policy just because the loan officer advised them to do so, can prove detrimental in more than one way.
As such it is always better to analyse the pros and cons of buying a policy prior to signing the agreement.
If used in the right manner can go a long way in helping solve the financial woes of many physically challenged and unemployed people.
However, for that both the government and loan seekers need to make conscious efforts to stop its misuse by financial institutions.
You may think you need this insurance. It does cover you in the event that you get into a situation where you cannot pay your lenders.
This covers mortgages, car loans and even credit cards. Although this sounds like a good idea, but it is not for everyone. There are a few things you need to know and consider before you buy a policy.
Do You Really Need It?
Right off the bat, you may answer yes to this question. Let’s look at how it works, what it covers, and the costs involved before you decide to purchase it.
PPI – A Guide To Coverage
Coverage only kicks in only if you have a balance on your loan, and only if you meet the requirements.
You will need to be unable to pay your creditors in some way before your insurance policy kicks in. Usually, your coverage will kick in under the following circumstances:
- You are injured and unable to work
- You lost your job and have no finances coming in
- You become disabled
- You develop a medical condition that prevents forces you to leave work.
- You die
This only covers your debts for a limited amount of time.
Usually it is one year or 12 months. This period of time can be longer or shorter depending on your policy. Once that time runs out, you are responsible for paying your debts.
PPI Claims The Financial Cost
This cover can get rather expensive. The amount the seller is asking for may seem small, but if you do a little math that amount can really add up.
The premiums can be added to the premiums of your loan, or they can be paid up front in one lump sum.
The method of payment for ppi claims depends on you and the company issuing your policy. These premiums can cost as little as 16% and as much as 25%.
In addition to the ppi claims premiums, you will more than likely have to pay interest, just as you pay with the loan. The interest paid on these prices is the same amount paid on the loan. If you are paying 8% interest on a loan, you are paying the same amount.
Insurance for credit card payments can be even pricier. Some companies quote as much as 50% or more for an upfront payment on premiums.
Reading a Policy
If you decide to pay for a policy, there are a few things you need to look at before you sign off on it. Besides the price and length, you also need to look at:
Other plans that may cover your payments. If you have this type of insurance, you don’t need it.
Mis Sold PPI Claims
Mis-sold Payment Protection Insurance or ppi claims has been a major subject of contention for a while.
Research by the Financial Services Authority (FSA) has found there have been millions of cases of mis-sold ppi claims.
Are any of the following cases from the FSA familiar?
If you can relate to any of these cases, you can make a claim, today, by filling out our claim form.
- You didn’t ask for a policy, but it was added without you being made aware
- You were informed that the cover was compulsory or that by taking it, you would have a better chance of obtaining finance.
- You wasn’t made aware payment protection was optional or that you could purchase cheaper cover elsewhere.
- If you at the time of taking your plan, you had had differing coverage, that would make certain that your deposits to settle the debt were possible – for example: income protection or an employer illness or a redundancy package – but at the time of you agreeing to the package, the bank were not did not ask you about these details, you can request for ppi claims compensation.
Any exclusion on the policy were not pointed out to you – for example the terms for cancelling the cover or significant exclusions such as stress and back problems.
You were unemployed, retired or self-employed when you took out the cover – if so, you would be unable to make a valid claim.
You had a medical problem or illness at the time of taking out the cover that could have kept you from working – this is unsuitable cover in this case.
Many policies have an upper age limit, usually 65 or 70. You claim if you were older than this at the time of taking out the cover.
If you bought a plan to cover a long term loan, there is a chance that it will run out before the loan is repaid.
Many policies will not cover the full loan term; the seller should have explain this limitation. If they didn’t, you can claim.
If you believe you have a mis-sold a policy and want to seek ppi claims, after reading the above, you are eligible to make a claim.
Nothing is more troublesome than losing your job, especially if you still have so many financial obligations.
Just imagine not being able to pay for all of your expenses like your child’s education, or your mortgage and debts. But there’s something that you can do. Save yourself the trouble by thinking ahead and getting payment protection insurance.
This is a special type of policy that ensures your capacity to pay off financial obligations instead of using your assets.
In case of unemployment due to factors like sudden illness, disability, or retrenchment, the insurance can cover all your existing loans and continuously pay for it.
Typically, this type of insurance is offered upon applying for a loan or mortgage as this is also a way for the creditors to make sure that they continuously get paid despite your unemployment.
There are a lot of insurance companies that offer it as it often comes as an extended package when applying for loan or mortgage.
It is very rare to find policies which are sold separately nevertheless, it is not impossible to find one. Purchasing this kind of insurance is not that much different than any other insurance.
All the usual considerations still apply like checking for the premiums and receive ppi claims, the amount which it covers, and how long the coverage lasts.
Likewise, it is very important to learn about the policy and read the terms and conditions thoroughly before purchasing.
What are the Benefits?
Aside from the fact that you are provided with security in terms of paying for your loans, this can also do well in letting you maintain a good credit score. Because you never actually stopped paying for the loan, you still have all of your credibility and it will not affect your future plans of applying of additional loans.
If you are one of the many who applied for loans in the UK, you might have come across this policy. If you haven’t, then you might not be aware of it yet.
Payment protection insurance is a policy that is made to give the bank its due compensation for the loans applied by their clients.
They are made to cover for payments if the person is proven incapable of paying off the installments.
Of course, there is a limit to this, as this coverage can only cover for no longer than 12 months.
There’s nothing wrong with the intentions in this case. The true problem lies on how people tend to obtain it. The question that people may have with their ppi claims policy is whether or not it is mandatory in the first place.
And this has caused a string of controversies, since most of the people who applied for loans in the UK aren’t even remotely qualified to have such.
And what’s worse, most of these people didn’t even know that they had the insurance on their loans when they applied for them.
If your policy covers pre-existing conditions.
The exact date your coverage starts.
Whether or not your coverage covers you if you are self-employed.
What Are PPI Claims Exactly?
PPI Claims, PPI, or loan repayment insurance, is a policy sold by banks or personal credit providers to cover the risk of non-repayment on a loan.
It provides back-up security against the loan in the case of an emergency, such as an unexpected illness, accident, disability, loss of job etc.
This insurance covers many illnesses, but not stress disorders or any physiological issues. Hence, the insurance allows the insured the time it takes to overcome many unannounced catastrophes.
To help the laymen understand it better, it is a back-up for a loan taken out. It helps you protect your measurable expenses, which means it is credit protection insurance.
This is a policy to protect your monthly loan or credit card payments for a year or 24 months in case the borrower is unable to pay due to some physical disability or illness.
These types of plans grant you mental peace & security that your payments will be repaid in due time, should something goes wrong with your job, or fall ill while you’re still repaying the debts.
Loans of all sorts are covered for a specific time period. It can even include your mortgage.
Also called loan repayment insurance, it is extensively sold by banks or personal credit providers to cover risk possibilities on an acquired loan, if the borrower falls ill, becomes disabled, loses his/her job, or falls into any trap that might prevent him/her from serving the debt, anything other than a psychological or stress related concern.
The price for the insurance varies according to such things as age, health, term of cover and the loan amount.
Now that you know what it is, it is also important to know that the product can be mis-sold and liable for ppi claims.
Most banks offer it as an add-on to the loan or an overdraft amount, and may suggest it will help you in securing a loan more easily. Many unsuspecting customers are sold plans alongside loans, credit cards, or mortgages even without any need.
PPI a form of coverage that many working in the UK select since it can be extremely beneficial should one lose their job and be unable to make necessary payments. One should particularly consider a protection plan if:
- An individual feels unstable about the future of their job
- An individual has little or no savings yet quite a lot of debt
- If you think you need it, you should take extra care.
Read through the policy documents and ask the company, or an independent financial adviser or broker, to explain anything you don’t understand.
Since it can get slightly complicated, the more research you can do prior to selecting a plan the better.
PPI Claims – Who Doesn’t Need A Policy
Chances are if you consult a company you will be told that you should take out a plan.
However, one should be smart before taking out a plan since it’s a no brainer that companies want to see as many policies as possible since this helps them make money.
According to ppi experts such as Martin Lewis, you likely do not need coverage if you would be able to get by on your sick pay.
Most companies provide benefits packages that pay you up to 6 months sick leave.
Additionally, if you have enough savings in your bank account to keep up with your direct-debits you will not need a plan.
Negotiate Your Plan
If you do decide that you need a plan, it’s important that you make sure you pay a reasonable price for the policy.
Just as companies would want to sell you a plan even if you don’t need one, they will also try to sell you one at the highest rate possible. Therefore it is important that you are in-tune with what you need.
One’s monthly premiums will vary depending on how long one will need to wait before a policy pays out and the maximum number of pay-offs one is able to seek compensation.
Regardless it’s necessary for one to do their research on the pricing for plans based on your needs.
There are many options out there, all vying for your business so it’s definitely recommended to shop around and negotiate wherever possible.
These plans can be a valuable asset for many businesses that extend credit to customers.
It protects you from risk on non-payment in the event that the customer loses their job or becomes ill and can no longer make pay money back.
PPI Claims – How It Works
The product is based on the creditworthiness of your customers and the amount of credit you extend to them.
For example, if you have 100 regular customers and about 20 of those make regular purchases, you can decide which of those you want to cover.
They may base it on the volume of purchases or past concerns when making the determination.
A customer that falls behind regularly is a higher risk than one that has always paid in the past.
Likewise, a customer that maxes out his account will be a greater risk than someone that keeps his balance low.
The obvious benefit of taking out a policy is that you get paid even if your customers fail to make their deposits.
For a small business that needs every bit of income, this can become an important reason to take out a policy.
However, another benefit that you enjoy with such a policy is reports from the company about your clients.
This allows you to learn about any financial difficulties that your customers encounter quickly so that you can protect yourself.
Another benefit is that the company will let you know which customers it will cover.
You can then base your decision to provide credit off of that information to prevent you from extending credit to someone likely to default.
While you may be hesitant to take on the cost of a product you hope to never use, it can help save your business in a tight economy.
Even customers with excellent credit can fall on hard times with an injury or job loss.
The result is that they can no longer pay their bills, leaving businesses short on cash. This form of provision protects you from that loss so you can keep your business in operation.
You can also control the costs of this, by deciding how much coverage you need.
Choosing specific criteria allows you to purchase at an affordable rate for you.
This is often a better way to protect a business than simply relying on credit checks.
While a credit check can help companies rule out customers with a poor deposit history, it cannot predict future events.
One or two customers that cannot pay their debts and make ppi claims, can signal the end for a business that is not prepared, especially if they have a large credit account with the company.
It is important that you don’t rely solely on information from a company to decide whether to extend credit to your customer or not.
You should always do your due diligence to investigate their creditworthiness and make the decision of whether to extend credit or not and if you wish to seek compensation through ppi claims.