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Archive for tag: PPI - Has Anything Really Changed

PPI - Has Anything Really Changed?

When the payment protection insurance (PPI) scandal broke, not many people realised how long the saga would last. With a 2018 deadline possibly on the cards for PPI compensation claims, we take a look at what has changed in the wake of the biggest scandal to have hit the British banking industry.

PPI is an insurance policy that should make repayments on loans and so on, should the premium holder be unable to do so for a variety of reasons. On paper, it sounded a great idea and a side move to protect your finances.

In reality, however, the way the policy was sold to customers meant that people either knowingly - or not as the case may be - bought into policy that was effectively useless to them.

As a result, there are many changes that have been made:

Single policy PPI is banned

Single policy PPI was when the customer paid for the policy upfront and in one lump sum. They were not overly common but there were a significant proportion of customers who had a single policy PPI.

What this meant in practice was that there was a significant lump sum added to the cost of the loan, on top of which the customer would also pay interest. What started as an affordable loan, quickly became a financial mill stone around the neck for many people.

When customers did complain or cancel their policy, they were told they were not entitled to a refund of any monies etc. This can longer happen.

7-day breathing space

Many people were sold the PPI at the time they took out a loan or other credit product. It has been recognised that for many people, applying for a loan, credit card and so on is an emotional decision. They invest a lot of emotional energy into needing the loan to be able to purchase something that is of importance to them.

This can make people more susceptible to suggestion and thus, when the representative suggested what a great idea it would be to protect your loan etc. people bought into the policy.

Some customers were also made to feel that their application was more likely to be successful and so wholeheartedly bought this additional policy.

Consumer rights

Until the PPI scandal broke, many people may have been under the impression that there was a whole different set of rules when it came to consumer rights and financial products. This is not the case; for example, you do not need to buy any other product from the bank at the time other than your loan or credit card etc.

PPI showed the banking industry that it needed to change in order to gain back the trust and loyalty of its customers. But, it has left many people wondering if banking will ever be the same again.