Payment Protection Insurance (PPI) has been a controversial topic in the financial world for several years. It was a type of insurance sold alongside credit agreements, loans, and mortgages in the UK, with the aim of covering repayments if the borrower was unable to pay due to unforeseen circumstances such as unemployment, sickness or accident. However, it was found that many PPI policies were mis-sold to customers, who were not aware of the policy or were not eligible to claim, resulting in a large number of complaints and compensation claims.
The PPI scandal has been ongoing for more than a decade, with the Financial Conduct Authority (FCA) estimating that over 64 million PPI policies were sold between 1990 and 2010, and that the total compensation paid to customers could reach £50 billion. The FCA launched a review of the PPI mis-selling scandal in 2011, resulting in new rules and regulations for the sale of PPI, and an unprecedented compensation scheme.
However, despite the FCA’s efforts to resolve the PPI scandal, there are still issues that need to be addressed, and the review is ongoing. In this article, we will look at the current state of the PPI review, why it is still ongoing, and what it means for consumers.
Background on PPI
PPI was a type of insurance that was designed to protect consumers if they were unable to make repayments on their credit agreements, loans, or mortgages. The policies were sold by banks, building societies, and other financial institutions, often at the same time as the credit agreement was signed.
PPI policies were marketed as a way to protect borrowers from unexpected events that could prevent them from repaying their debt, such as redundancy, illness, or accident. However, it was found that many policies were mis-sold, either because customers were unaware that they had been sold the policy, or because they were sold the policy despite being ineligible to claim on it.
There were many ways in which PPI policies were mis-sold, including:
Customers being told that the policy was mandatory or that they had a better chance of being approved for credit if they took out the policy.
Customers being sold policies that were unsuitable for their needs, such as policies that did not cover pre-existing medical conditions or policies that did not cover self-employed borrowers.
Customers being sold policies that were too expensive, with high premiums and hidden fees.
Customers being sold policies that they did not need or want, such as policies that duplicated existing insurance coverage.
The PPI scandal resulted in a large number of complaints and compensation claims, with many customers receiving payouts of thousands of pounds in compensation.
The FCA’s review of PPI
In 2011, the FCA launched a review of the PPI mis-selling scandal, with the aim of identifying the extent of the problem and ensuring that customers were compensated for any mis-selling that had taken place. The review involved working with banks and other financial institutions to identify customers who had been sold PPI policies that they did not need or want, or who were ineligible to claim on their policies.
The FCA’s review resulted in a number of new rules and regulations for the sale of PPI, including:
A ban on the sale of single-premium PPI policies, which required customers to pay the entire cost of the policy upfront.
New rules for the sale of PPI, including a requirement for firms to provide customers with clear information about the policy, including the cost, the benefits, and any exclusions.
The introduction of a compensation scheme for customers who had been mis-sold PPI, with banks and other financial institutions required to compensate customers for any losses that they had suffered as a result of the mis-selling.
