Following a huge number of complaints, the Financial Services Authority took legal action against UK banks and others for mis-selling payment protection insurance (PPI) policies to millions of customers who had taken loans or had applied for any form of credit. The final court ruling in April of 2011 declared that in a huge number of cases the lenders' selling practices were unfair and unethical, and the court ordered them to refund PPI costs to any customer who makes a legitimate claim. The banks finally conceded defeat and announced that they will not appeal the ruling. Instead, they've set aside an amount totalling nine billion pounds, which they estimated would be required to refund all valid claims.
The way then became clear for customers who felt they had been mis-sold PPI to claim a full refund, either directly to the bank or company responsible, or, alternatively, via a no win-no fee claims management company such iSmart.
When a customer takes a loan or credit, the bank or company should inform them that PPI is a useful optional extra that can ensure uninterrupted re-payments of the loan if the customer is temporarily unable to. It avoids incurring financial penalties and the customer's credit rating being damaged. They have to inform the customer that PPI, while very useful, is an optional extra. It can be purchased from the loan provider or from any other provider of PPI. If the customer is willing to purchase PPI from the loan provider, the lender must ensure that their particular PPI product is suitable for that customer by enquiring into the customer's personal circumstances regarding such things as existing health condition, employment status, (whether employed, self-employed or retired). It may be that their particular PPI policy isn't suited (or only partially suited) to the customer's requirements and, if so, the customer has to be made aware of that fact.
Various underhand methods were used to sell borrowers a PPI policy, including:
Informing the customer that PPI was compulsory.
Informing the customer that their chances of being approved for a loan would be improved if they agreed to purchase PPI from the lender at the same time.
Including PPI without informing the customer.
Selling PPI without checking if the customer was eligible to make a claim.
Presenting PPI on pre-printed forms as an opt-out option rather than an opt-in option.
Anyone who was sold PPI under any of those circumstances is now able to claim a full refund. The law is on their side. Many have already done so, and almost two billion pounds have been paid out so far.