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Archive for tag: 4 Criticisms of PPI

The 4 Criticisms of PPI

Back in 1998, a report from respected consumer organisation 'Which?' highlight payment protection insurance (PPI) as being expensive and ineffective. It drew attention to a product that would become infamous and one that would keep lashing out at the British banking industry until the PPI deadline August 2019.


But it wasn't until 2011, 13 years after this initial report was published, that PPI compensation would start to flow back to customers. In the intervening years, firms and banks were fined for mis-selling of PPI - Barclays was recently fined again, in 2018, for breaching compensation rules relating to PPI - it took years of arguments and judicial reviews before the banks came to the same conclusions as everyone else.

And that was, PPI was and had been mis-sold on a gargantuan scale and customers were entitled to their money back.

The major criticisms

In 2011, the four-fold criticisms of PPI were highlighted in parliament. Reports and research by 'Which?' and other groups presented four key findings of PPI, all of which are being echoed time and time again with compensation claims;

#1 Expensive

PPI added to the cost of the loan, in some cases by as much as 20%. There were some cases of loans in which PPI double the cost. This expensive addition to a loan meant that many people soon struggled to repay the loan that they had opted for.

In many cases, fees and costs were also added to the loan when PPI premiums pushed people over their agreed credit limit.

#2 Ineffective

Insurance products are meant to offer peace of mind to customers that they have major events in their lives covered by a financial product. For example, home insurance in the case of burglary or fire.

Although we expect these policies to have terms and conditions, we expect them to be fair. It was found that in the case of PPI, it was structured in a way to limit the chances of someone making a claim.

#3 Mis-sold

There are many reasons why PPI was mis-sold to customers but the one that was highlighted in parliament back in 2011 was that customers were being told that PPI was "essential". In other words, people were told that it was compulsory or given the impression that it was.

Customers were also given the impression or even told that their application for credit stood a better chance if they took out the policy alongside their loan.

#4 Inefficient

For those who did attempt to claim on their PPI policy in the case of genuine illness, they found a process littered with lengthy delays and complicated forms.

In other words, it was incredibly difficult to make a claim on PPI and with only 15% of claims being successful, it gives you a clearer picture of how poor a product PPI was. Was it sold to you?