Has anyone ever stopped to really think about the amount of money which loan and credit insurance actually costs? Credit insurance is sold by all the banks and finance companies and is designed to stop you getting into debt if you fall ill or are made redundant. Credit insurance will keep up your monthly loan or credit card repayments for a fixed period usually up to one year. Analysts believe that there are more than 20 million loans and credit card agreements with some form of payment protection and that as many half of all policies have probably been mis-sold.

Industry sources are now claiming that the ?scandal? of improperly sold Payment Protection Insurance (PPI) could be even bigger than the Endowment mis-selling claims of the last six or seven years. In essence the sale of any PPI must involve a properly completed Fact Find to establish the ?need? for such a product. People are now starting to claim that the PPI was added to the agreement without consent or that the cost of the PPI (often many £ thousands) was added to the loan ? and payable first with interest also added!! ? when the loan was later settled early there was no PPI rebate back to the customer. Indeed a loan may have been running for more than two years and the customer would not even have started paying back the actual loan. The banks have placed sales pressure on their own staff to sell PPI to customers. There are reports that bank staff have often tried to use the PPI as a means to getting the loan approved i.e. by suggesting that the loan would be more likely to be approved if the customer agreed to PPI.

Again we hear of many self employed people being persuaded to take out PPI as part of a loan when self employed people are usually specifically excluded from claiming anyway. Another common complaint has been that couple taking out a joint loan have been persuaded to take out PPI cover; then when the second signatory tries to claim, for example due to ill health, the claim is denied because only the FIRST NAMED signatory to the loan is actually covered by the PPI and not both parties.

An announcement in March 2007, by the one of the credit industry?s key watchdogs the Financial Services Authority (FSA), has stated that any person sold a ?single premium policy? (usually a single payment of up to £5,000 or more added to the cost of the loan) could be likely to be eligible for refunds in the event the loan was cancelled before completion of the loan term. Even more alarming is that the FSA now appears to be coming to the conclusion that there has been systematic abuse and mis selling of all PPI products for a number of years.

Stuart King of FSA recently said

?Our work in the PPI market has demonstrated it has not been sold correctly over a prolonged period. We have seen too many real cases of individuals who do not appear to have been fairly treated when purchasing PPI?.

Similar enquiries by Office of Fair Trading have similarly concluded that less than 25% of all PPI policies result in a paid out claim.

The message is clear. The banks have been profiting for many years from the sale of lucrative PPI policies to people buying financial products. The peace of mind and support provided by PPI has helped some people avoid overwhelming debt problems. However, for a large minority, PPI could well have been wrongly sold or premiums not paid back to the customer. If you find any current or old finance agreements and believe you should make a claim then contact the FSA (www.fsa.gov.uk) or The Office of Fair Trading (www.oft.gov.uk ) to find out more information. There are an increasing number of specialist claims companies prepared to take on mis selling claims on your behalf on a ?no win no fee? basis. Most of these companies have been heavily involved in endowment mis selling so will have the systems in place to support your application. However the usual finance rules apply ? NEVER pay any money to anyone upfront. Only pay on results. If you want more information on a completely impartial basis then send us an E Mail (enq@financialguardian.co.uk) and we will try to point you in the right direction.

Labels: debt insurance, loans