The Office of Fair Trading issued guidance to lenders to clear up a lack of clarity in the Consumer Credit Regulations of 2004. The OFT insisted loan agreements include clear and separate information stating exactly how much Payment Protection Insurance policy is costing you.
Payment Protection Insurance, or PPI, is insurance that will pay out a sum of money that should help you continue to pay your monthly payments on loans, credit cards, mortgage, car loan, etc. This is normally as a result of sickness, accident or unemployment due to no fault of your own.
TOP 10 GROUNDS FOR COMPENSATION- Based on your situation when you took out the PPI.
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You were under 18 or over 65.
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You worked less than 16 hours a week.
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You were employed on a temporary or contract basis.
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You suffered from stress or backache.
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You had an existing illness.
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You were aware you may become unemployed.
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You were not told about the cost of the insurance (or not told you were buying it at all).
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You were not asked about any other insurance you had.
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You were told the insurance was necessary for you to get the loan.
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You were not told that the same policy could potentially be bought cheaper elsewhere.
PPI: if the complaint is successful.
Refunds should include PPI premiums paid plus any additional interest charged. If the complaint is upheld, the firm should do its best to put you back into the position you would have been in if you had never taken out the PPI.
If you are in arrears on the agreement that you are claiming the PPI, then you should be aware that the lender can now offset any claims against arrears outstanding. This could therefore reduce the debt that you have outstanding but other than the interest claimed, leave you with no extra money in your pocket.
Example:You have a loan for £10,000, included in this loan is £2,500 worth of mis-sold PPI.You are in arrears on this loan to the sum of £3,000, this might be with a Debt Management Company.A successful PPI claim, results in the £2,500 being paid back to you. Although because you are in arrears, the £2,500 redress is paid off the total arrears outstanding. This is great news, as you have now reduced your arrears from £3,000 to £500, but you have not been paid that amount direct.As part of the PPI claim service, we would look to claim back the total PPI paid to date, plus 8% Interest.The interest at 8% of the £2,500 claim above, would be £200. This £200 would be paid direct to you, either by a cheque or a bank transfer.PLEASE NOTE: Most claims management companies charge a success fee for PPI claims, if the fee you are due to pay your claims management company is more than the interest you will receive back, claiming your PPI could leave you with an additional debt.
Single Premium Policy.
Over the past 18 months the Financial Services Authority has banned many mortgage brokers from practicing.
The Times in November 2007 reported that more than 371,000 home owners believe they may have been given bad advice or have been mis sold mortgages.
Stephen Bland of the Financial Services Authority on the subject of mortgage brokers giving bad advice and mis selling mortgages said, “We found some willing to offer mortgages they know to be unaffordable and to accept self cert business even when they had concerns that the financial information provided by the customer was implausible. These practices are completely inconsistent with treating customers fairly.”
If you have a single premium policy, such as those often attached to personal loans or finance agreements, the compensation you should receive will depend on whether the loan is still in force or not. If the loan is still in force – the lender should calculate what the loan repayments would have been had PPI not been added to the loan, and how much should have been repaid so far. Any overpayments you would have made will then be applied to the outstanding loan – reducing the amount of capital owed or refunded.
If the loan or finance agreement is no longer in force – we should still get back any PPI payments made, plus the difference between the redemption figure paid and what it would have been had this PPI policy never been taken out
Statutory compensation for mis-sold PPI.
You may also be entitled to statutory compensation which is usually set at 8% of the money refunded. This is to make up for the fact that you have not been able to use the money during the time the PPI was being paid.
Don't leave yourself unprotected. The idea is that PPI covers debt repayments if you cannot work – for example, if you become ill, made redundant or have an accident. You must ensure you are protected properly to cover these circumstances. DPSP work with a team of Insurance specialists, who would be happy to help you find the right Insurance to ensure that you are fully covered. For more information please call the office on 01543 462 357 and ask for Insurance Help.
Mis-selling checklist.
If you can answer ‘no’ to one or more of these questions, you may have been mis-sold PPI.
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If the insurance was optional, was that made clear?
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Did the adviser tell you about any significant exclusions under the policy – for example, the exclusion that says you won't be covered for any pre-existing medical condition?
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When you took out a loan or finance agreement, did the adviser make it clear that you would have to pay for the insurance up front in one single payment?
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If you had to pay for the PPI as a single payment, did the adviser make it clear that the insurance cost would be added to the loan and you would be paying interest on it?
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Single premium PPI insurance normally only lasts five years. If your loan or finance agreement was for longer than this, did the adviser make it clear that the insurance would run out before you had finished paying for the loan or finance agreement?
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The adviser should also have told you that you would continue to pay interest on the insurance premium, even after the insurance expired.
Since January 2005, the sale of payment protection insurance (PPI) policies has been regulated by the Financial Services Authority (FSA).
Information that should have been given.
If some or all of this information was not made clear to you, either before or at the time you agreed to take out the insurance, then you may have grounds to complain. If PPI was optional on the product bought, this must have been made clear.
The adviser should have made you aware of any significant policy exclusions and checked whether any of these exclusions applied.
The adviser should have made it clear how much the policy would cost and whether the PPI would be paid by a single up front premium, or by regular premiums.
If it was a single premium policy, the adviser should have made it clear that the cost of the insurance would be added to the loan or finance agreement and that you would be paying interest on the insurance premium.
If the insurance expired before the loan or finance agreement, the adviser should have made it clear that this was the case and (in the case of single premium policies) that you would continue to pay interest on the insurance premium after the insurance had expired.
Single premium PPI is too expensive.
PPI can be very expensive. For example, adding PPI to a £7,500 five year loan could cost an additional £2000-£3000. It can often cost as much, or more, as there are other types of insurance that provide better protection.
Extra interest.
Worse still, when sold alongside a personal loan or a finance agreement, PPI tends to be sold as a ‘single premium’ policy. This means a lump sum representing the cost of the insurance is added to the amount borrowed, so you end up paying interest on both the insurance premium and the loan.
Credit Cards and Mortgages
PPI linked to mortgages and credit cards usually pays out only for a limited amount of time, most often 12 months (although some policies offer a 24 month pay out period). Also on some credit card PPI, the insurance only covers the minimum monthly payment, meaning the balance may never reduce.
You also won't be covered for conditions like back pain or stress under most policies. If you are on a short-term contract, or self-employed, you may not be covered for any redundancy claim.
Don't end up paying for nothing
Also most PPI policies only last for 5 years, so if your loan or finance agreement term lasts for longer than this, you will still be paying interest on insurance that has long since expired.
DPSP - 65 Heath Gap Road, Cannock, Staffs WS11 6DY. Tel: 01543 462 357 Fax: 0844 2250713 Text: 07540 685832 Web: www.dpsp.co.uk CLR PR Ltd – T/A Debt & Property Solutions Plus (DPSP). Consumer Credit Licence No: 620631. Data Protection Licence No: Z1426079. Debt & Property Solutions Plus Ltd (DPSP). Ministry of Justice Registration No: CRM21101. Data Protection Licence No: Z2430403
