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What to do if you were missold insurance

Over the last two decade people have been missold insurance which was intended to cover loan, mortgage or credit card repayments if they fell ill or lost their jobs. Payment Protection Insurance (PPI) is often included in a loan or credit card’s small print and is not properly understood or explained. Many people were led to believe that accepting PPI would give them a greater chance of being accepted for a loan, and some irresponsible lenders failed to ask borrowers if they were already protected by other forms of insurance like Income Protection Insurance.

Dissatisfaction in the market place and consumer complaints led the Financial Services Authority (FSA) to challenge the lenders. The challenge was based on four main points.

1 PPI was an expensive insurance. The premium often added as much as 20% to the cost of a loan. In some cases, it could add 50%.

2 The second problem with PPI is that it was structured to minimise the chances of anyone making a claim.

3 Thirdly, it was being sold to customers who either didn’t realise it was part of their finance agreement or sold to people who would not be able to claim it, such as the self-employed.

4 Finally, making a claim was unnecessarily lengthy and complicated. This helped to make PPI very profitable for the banking industry. In 2004 a study undertaken by The Guardian revealed that many banks were returning less than 15% of PPI money to claimants.

Financial Services Authority

The Financial Services Authority’s decision to challenge PPI had led to changes in the way that it’s implemented by banks and could lead to compensation, if you were missold insurance.

British Banking Association

For a time, the British Banking Association challenged the FSA, but they have now dropped their legal battle and providers are required by law to contact anyone they believe was missold PPI. As this could take a long time to complete, customers can contact their PPI provider to state their case.

Financial Ombudsman

If necessary you can make a claim through the Financial Ombudsman or Financial Services Compensation Scheme, without charge.

Final Word

This form of insurance is also known as credit protection, loan protection or accident, sickness and unemployment insurance. So if you have been missold insurance under any of these titles, you could be due compensation. The FSA requires all banks to respond to claimants within eight weeks and they are tightly regulated to make sure that they comply, so your claim will be dealt with swiftly.

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