The problem with payment protection insurance

Lenders can no longer offer PPI at the same time as loans. People who would like to purchase Payment Protection Insurance can decide to buy a regular premium PPI instead. This is due to the fact that many of such policies were widely mis-sold over the past decade

. A large number of PPI complaints brought to the FOS are upheld in the consumer’s favour. This indicates the extent of the problem with PPI and gives hopes to consumers who have tried and failed to obtain compensation from their lender. Complaints about PPI have been steadily rising. The FOS has alread informed us that it is dealing with a record number of PPI complaints.

So it begs the question – why are so many people complaining about PPI?

One of the most common reasons for complaint about payment protection is that consumers have felt obliged to take it out. That is to say, the lender would indicate in some way that the loan application would only be successful if the insurance policy was taken out. Some consumers have indicated that financial institutions went a step further by coercing them to take out payment protection insurance.

It is not in the interests of each and every person to take out PPI insurance. Anyone who already has a medical condition may not be able to claim on the policy if the condition comes back and they are unable to work. Other medical conditions are also not covered, for example back related problems and stress. PPI insurance can also be unsuitable if the person is retired. This is because self employed people can only claim if their business is wound up.

When PPI is added to a loan the repayments are significantly higher. This is because interest is also paid on a single premium policy. Certain aspects of the policy should be discussed with the customer before the policy is sold to them. To pursue a successful claim, people need to gather as much evidence as they can about the way the policy was sold to them.

It helps if you can find a copy of the loan agreement. It is a lot more simple to make a complaint if you have the relevant facts to hand. Not all complaints are successful. Some complaints are denied by the loan provider. At this point the consumer needs to understand why the complaint was rejected and what options are available to them. The Financial Ombudsman Service has said that fifty percent of people give up when the complaint is initially denied. Some people are unaware of what to do next.

There is a plethora of resources available online to assist people with taking the next steps. For example, there are several articles about PPI available. Anyone who doesn’t want the hassle of all this paperwork can engage the services of a claims company. These professionals can handle PPI complaints and you usually don’t have to pay any upfront fees. The advantage here is peace of mind for the consumer. They can simply leave the paperwork for the claims management company to deal with.

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