Lenders are still taking the PPI out of 2 million loans

by WhichCampaigner

Story link: Lenders are still taking the PPI out of 2 million loans

As many as two million* loan Payment Protection Insurance policies have been sold to people who may never be able to make a claim, according to new research by Which?

A third* of consumers who have taken out a loan with payment protection insurance during the past five years may fall foul of at least one ‘significant exclusion’ that would prevent them from making a successful claim.

People who are self employed or on a fixed term job contract, for example, often aren’t covered by PPI. Nor are many people aged 65 and over, or people who might claim for absences relating to pre-existing medical conditions.

PPI is sold alongside loans, credit cards, finance agreements and mortgages to cover repayments if people are off work because of illness or unemployment. Which? estimates that around six million PPI policies - about a third of the market - were attached to loans at the end of 2006.

Which? found that the average loan is £6,000**, with repayments mounting to £200 or more a month. However, ten per cent of people don’t know whether their loan is secured or unsecured, leaving them vulnerable to potentially losing their home.

Doug Taylor, Personal Finance Campaigner, Which? said:

“We’ve always known that people were being mis-sold PPI, but we were still amazed to discover the scale of it. It appears that salespeople are chasing their commissions, their bosses are chasing profits - where’s the sense of responsibility to the customer?
“If you have a loan and think you might have been mis-sold PPI, now’s the time to fight back. Compensation could be just a letter away.”

If you are unsure whether you have been mis-sold PPI, follow this simple checklist. If you can answer ‘no’ to one or more of these questions, then you may have been mis-sold:

> Optional Did the adviser make it clear that the insurance was optional (if this was the case)?

> Exclusions Did the adviser tell you about the ‘significant exclusions’ under the policy? For example, the exclusion that states you won’t be covered for any pre-existing medical condition?

> Paying for insurance up front If you took out a loan or finance agreement, did the adviser make it clear that you would have to pay for the insurance up front in a single payment?

> Borrowing to pay for insurance If you had to pay for the insurance as a single premium, did the adviser make it clear that the insurance cost would be added to the loan and you would be paying interest on it?

> Insurance expires before loan If your PPI policy expires before your loan or finance agreement does, you’ll be paying interest on insurance that is no longer in force. Did the adviser make this clear?

For more information on how to make a complaint and begin the process of claiming back your PPI, visit www.which.co.uk/ppi.

*In February and March 2008 Which? surveyed 579 people who had taken out a loan during the past five years and found that 32 per cent also purchased PPI and of those a further 32 per cent may fall foul of one or more of the ‘significant exclusions’ if they tried to claim. With approximately six million such policies, this equates to 1.9 million. Statistically, this puts the estimated figure between 1.7 and 2.1 million.

** The research also found that the overall average loan is for £6,050. One in ten people have a loan of £10,000 or more. The average secured loan is worth £7,190 compared to an unsecured loan average of £5,760. And 10 per cent of holders do not know if their loan is secured or unsecured.

Information on PPI

> PPI only pays out for a limited amount of time, usually 12 months, although some policies offer a 24 month pay-out period.

> Credit and store card PPI often covers only the minimum amount that must be paid each month.

> When sold alongside loans or finance agreements, PPI is sold as a ‘single premium policy’, which means a lump sum covering the cost of the insurance is added to the amount you have borrowed, so you end up paying interest on both the insurance premium and the loan.

> PPI policies last for just five years, so if your loan or finance agreement is for longer than this, you’ll still be paying interest on a policy that has long since expired.

For more information on how to make a complaint and begin the process of claiming back your PPI, visit www.which.co.uk/ppi.