If you’ve turned on the TV and/or radio sometime in the last decade or so you will most likely have encountered adverts saying you can claim back money from the mis-selling of Payment Protection Insurance, also known as PPI.
But what exactly is PPI and how did claiming it back begin to dominate the advertising spaces of so many broadcasters? The answer lies in what exactly PPI is and how it was ‘sold’ by financial bodies.
What is PPI?
Payment Protection Insurance is essentially a financial instrument that is designed to cover repayments in circumstances where the person may not be able to, such as redundancy, illness, or death.
PPI is often sold alongside different kinds of lending products including credit cards, mortgages, overdrafts and others such as car financing agreements.
PPI has been around for quite a while, with the Financial Conduct Authority estimating as many as 64mln policies were sold in the UK, mostly between 1990 and 2010 but with some going back as far as the 1970s.
So what’s the problem?
The issue at hand is not so much that PPI policies exist, it is that the policies were mis-sold alongside other financial agreements, in many cases without fully explaining what was covered and the criteria required to claim.
Additionally, some lenders outright lied to customers by telling them that the PPI was a compulsory element of the loan, or simply added it without the knowledge or consent of the borrower.
Why did PPI claims suddenly become popular?
A ruling by the UK High Court in April 2011 upheld an instruction by the FCA that banks would have to trawl through their records and contact customers who may have been mis-sold PPI policies.
The British Bankers Association (BBA) initially argued that the instruction would force them to apply new standards to sales that had already been agreed before the new guidelines, but did not appeal the decision thus opening the floodgates for PPI claims.
What has happened since?
Some of the large high-street banks have seen big outflows of cash as a result of the PPI ‘scandal’, with Lloyd’s Banking Group PLC (LON:LLOY) having paid out £18.8bn as of 1 August 2018.
Lloyd’s is not the only bank to see PPI impacting its earnings well into the present, with fellow bank Barclays PLC (LON:BARC) seeing a £400mln hit to its profits for the first half of the 2018 financial year.
However, if people still haven’t checked if they’re entitled to a PPI claim, they will have until 29 August 2019 as the FCA introduced a cut-off date for claims earlier this year.