Rip Off PPI Is Over But Now Costs Will Rise
Aug 6 2008
It was another case last week, of a company receiving a massive fine for mis-selling payment protection policies.
This time it was Liverpool Victoria Banking Services. Describing itself as Britain's largest friendly society, the company was ordered to pay �840,000 for what the Financial Services Authority, who ordered the fine, called 'serious failings.' 14,500 of these were sold between 2005-2007. The cost to each customer, of this gross financial negligence, was an average of �1,600. The finer was kept to a minimum of �840,000, by the company cooperating from the outset. It otherwise could have risen to a figure of �1.2million.
The whole purpose of payment protection insurance is to allow policyholders to cover monthly finance payments, should they find themselves out of work due to illness, accident or redundancy. It is often sold along side various borrowing, such as personal loans, credit cards and mortgages.
Up until 2006, Liverpool Victoria's policy was to add the cost of PPI onto borrowing, without consulting the customer.
Should it not have been for the intervention of the FSA, and then Liverpool Victoria customers would have been paying interest on their PPI, until the full mount of the loan was repaid. There are currently around 14million PPI policies active, the majority of which have been sold along with a loan.
People borrowing, are unaware that the cover can be purchased extrinsically from the loan. This has produced somewhat of a monopoly.
A report by the Competition Commission, which was published in June, claims that in just a year, consumers were overcharged by a staggering �1.4billion. It has been a prediction of the legal profession that this report is going to cause a lot of big changes.
A partner from a firm named Eversheds, Chris Busby, has been quoted as saying 'It is possible that certain products may become unviable.
Eversheds is a law firm that has previously acted on the defence of companies that have been accused of mis-selling products, and is now expecting to deal with the thousands of cases that will be brought about by disgruntled consumers.
The company feels that there may be truth in the notion that claims management companies have been going through the records of people that have been previously mis-sold endowment policies. These people may be within their rights to sue.
Mr Busby stated that claims management companies have been issuing claims for people being mis-sold PPI without fully investigating the cases. He said 'In some cases these complaints are speculative and unjustified.'
If you go on the Internet, a brief search will allow you to establish a plethora of companies that offer a service of recovering premiums and interest for PPI customers who were sold insurance for a shorter period than the loan that they were protecting, or were ineligible in any circumstance, to make any sort of claim on their policies.
If you can show proof of your PPI being mis-sold to you then you can expect to receive some sort of compensation. It is a case though, claims Jonathan Richards, who is also a partner in Eversheds, of policies being completely cancelled, should customers be making claims.
Mr Richards stated, 'That might be the last thing they would want at a time of rising unemployment. It's like selling your umbrella just as it's about to start raining.'
I do wonder what will happen to all those people who have claimed back their premiums and become unemployed, what will happen when they find they are uninsured? Will they complain about the claims management companies?'
People who are going to claim back their premiums, and any interest they have been charged, should be aware that companies that they may employ to carry out the service on their behalf, will often charge up to 25% commission for doing so. Free help is available from the Financial Ombudsman Service in some cases though.
It is a case though, of such claims possibly pushing prices up. The companies that were benefiting from the profit that they were making on PPI Will undoubtedly have to spread the cost of the shortfall by increasing prices in other areas.
Claims Management UK can help you with your Mis-Sold PPI