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One Step to Victory in the PPI Reclaim Battle

30th May 2011

UK banks have already waved the white flag in the battle over PPI, or payment protection insurance. Just this May, they have confirmed that they don't have further plans to appeal a High Court ruling that supports the Financial Services Authority's (FSA) instruction to banks to dig around their past sales for records of accounts with PPI and to advise policyholders that they can make a claim on their insurance cover. A lot of banks have surrendered and have started to process PPI claims and review their process of handling complaints. Some banks have even expressed their desire to stop marketing PPI altogether. But for those who will continue offering PPI, they'll have to be very careful about their selling process given FSA's new standards.

The UK banks' choice to not appeal the High Court's decision simply means that millions of people may now be qualified for compensation. This is because PPI was wrongly sold to borrowers who were misinformed that PPI is mandatory before they can be granted their loan, or offered to people who were ineligible to make a claim on their insurance cover, and even to customers who weren't even aware that they were taking out PPI.

The culprit behind the whole issue is the lack of transparency just for the sake of making a sale. In fact, research found that thousands of borrowers were misled into getting PPI on their credit cards because they thought this would increase the chances of their applications getting approved. There were around 9.8 million consumers with credit cards that had PPI attached in 2008, earning PPI providers roughly £970 million annually. Of these, roughly 10% took out PPI under the erroneous belief that it was compulsory or it would boost the chances of approval. In addition, 28% stated that the credit card agent who spoke to them told them that PPI was a good idea, even though the policies are difficult to claim upon and are full of exclusion clauses. Worse still, the Competition Commission discovered that credit card PPIs only had an average payout of a measly 11%.

But what is PPI minus the deceptive sales tactics? Payment protection insurance, or PPI, is a type of insurance cover that is taken out against various forms of borrowing such as credit cards, personal loans, and mortgages. Its purpose is to protect the consumer in case he/she can no longer keep up with the monthly repayments for a certain period of time due to accident, illness, or redundancy.

Credit card PPI accounts for more or less 25% of the PPI market. But as previously mentioned, merely 11% of policies are claimed. This figure arises from the millions of people who were forced to take out PPI despite their non-acceptable qualifications, plus those who have been unknowingly paying for PPI. There are other cases of consumers being misinformed and at times, being pressurized using aggressive sales techniques.

Also, a lot of policyholders have discovered the inherent problem of credit card PPI: it only takes care of the minimum amount that you must pay monthly, meaning your outstanding balance may almost be never reduced. And since credit card PPI typically pays out only for up to 12 months but most policies last for five years, you can still be shelling out for PPI premiums long after you've settled your full credit card balance.

If you're a policyholder that's been wrongly sold PPI, it's so easy to lose hope about ever reclaiming what's rightfully yours due to all these negative issues about the said insurance. But despite all this, there's still a silver lining! With all publicized stories about the deceit and trickery employed to sell PPI, miss selling is easier to prove. So if you think you've been inappropriately sold PPI and the premiums are worth reclaiming, then go ahead and reclaim! With the UK banks getting a directive to straighten out this issue, you'll be sure that your reclaiming case won't be stalled. Write a formal letter and state all of the reasons why you think you were miss-sold. If you get no response or you receive a disappointing answer, then forward your case to the Financial Ombudsman Service. Don't give up on reclaiming what's yours.