Last year the issue of payment protection insurance (PPI) and the mis-selling of it was the cause of more consumer complaints that anything else, according to the Financial Ombudsman Service. The FOS reported that 60%, or well over half a million of all the complaints they received about financial products in 2011 were related to sales of this personal insurance.
PPI is supposedly meant to protect a borrower who can’t make the payments due to illness, job loss or other fairly non-specific circumstances. It is also supposed to be optional and at the request of the card holder, not a requirement by the financial institution for advancing credit. The problems have arisen because many thousands of customers have been charged for insurance they didn’t know they had, never used and couldn’t afford in the first place.
The consumer watchdog Which? reported that around 10 million people in the UK are paying PPI and at least 13% of them were given the impression that it was necessary if they wanted credit privileges, or that it gave them a better chance of being approved for a loan, mortgage or credit card. FOS called for leading banks to notify their customers in writing that they can claim a refund if they’ve been paying for PPI that they didn’t want.
Recently Allied Irish Bank sent out such a letter, basically mentioning that they had found ‘inconsistencies’ in the sales of PPI and asking its customers if they had intended to buy the insurance when they applied for a credit card account. However, the bank did not specify what the inconsistencies were or whether any refunds would be forthcoming.
If consumers think they have a valid claim they should explain it to the creditor, and if that brings no satisfaction, contact the FOS. Huge amounts have already been paid by lenders as refunds for mis-sold insurance, so it’s worth the effort to follow up if you feel you’ve been mislead and/or overcharged.