If you live and work in the United Kingdom, there is a good chance that you have heard about PPI claims because it topped the list of financial concerns in the UK in the past few years. Ideally, PPI is a type of insurance that protects one’s current liabilities or payments like credit card bills, loans, and sometimes mortgages. Payment protection covers these payables for a minimum period of twelve months in case one becomes disabled, loses the job involuntarily, or dies. An estimated 18 million people in the United Kingdom have taken out PPI policies.
The UK’s ‘Subprime’?
It is understandable how PPI sends anger and chill down the spines of consumers in the UK, who closely associate it with the Subprime Crisis of the US that led to the Great Recession. Since 2008, banks and financial institutions have come under intense fire for allegedly mis-selling PPI to millions of Britons. The controversies revolve around issues such as telling consumers that PPI is compulsory policy when they apply for loans. There are worse cases in which people were not told they have been sold PPI. Similar charges have surfaced against financial institutions in the millions, complaining about the way PPI was sold to people, usually bordering on the lack of information about PPI as it was sold.
Waitlisted for Years
Currently, there are three million PPI policyholders whose complaints are in queue at the Financial Ombudsman Service or FOS, which is the primary body mandated to handle individual financial disputes between consumers and banks. Even as the FOS processes hundreds of PPI concerns every day, millions are still on the waiting list. Based on a study by the FOS, the average number of complains about PPI is 150 per day, or roughly 50,000 complaints a year, adding to the backlog it has accumulated over the months.
A Welcome Blessing
Claims companies are quick to pounce on the PPI frenzy, as they go after big banks and financial institutions and help policyholders claim their refunds. For some, 10% to 20% of the total cost of claims is a price worth paying compared to what they will have to endure waiting years for the FOS. For many of the mis sold PPI policyholders, claims companies are a welcome blessing that offsets the long queue at the FOS. Once deemed eligible for a claim, papers are processed at once, and are presented to the small courts for legal remedy. If a case is won, part of the claim is shared with the claims company who helped reclaim the money. The claims company option is attracting many PPI policyholders because of the speed and lack of additional charges for assistance on the part of the consumer.
Banks Recoil; Stops PPI Sales
Because of the heat of the PPI controversies, a number of banks have already stopped the selling of PPI for fear of losses and more lawsuits. Major banks like Alliance, Barclays, Lloyds TSB, Halifax, and Bank of Scotland have stopped the selling of PPI since February of 2009, and more banks are expected to follow. However, sales of PPI are not expected to cease since there is still a large number of firms that offer the insurance.
Lesson for both Parties
Much of the PPI complaints are rooted in lack of information about PPI, while a sizeable figure is attributed to selling PPI without the knowledge of the consumer. For the part of the consumer, being aware of what is actually being sold to them must be a habit they must practice every time they are offered insurance, loans, and anything that concerns finances. For the part of the banks and financial institutions, it is against the law to advertise falsely, and mislead consumers into buying products.
