Mis-sold Payment Protection Insurance

During the sale of a PPI policy, the adviser must:

• Ensure the consumer receives all communications and material in a clear, fair, not mis-leading and understandable format
• Carry out a full fact find on the consumer in order to determine the consumer’s exact individual requirements and needs
• Ensure that the consumer fully understands all benefits that are covered by the PPI policy and what is not covered by the policy, thus allowing the consumer to make an informed decision
• Clearly demonstrate the cost of the PPI and how the premiums are applied to the account; there are different formats dependent upon the type of PPI that was taken out
• Ensure that the consumer fully understands any exclusions of the PPI policy where it will not pay out
• Make it clear that there is a “cooling off” period before the final completion of the sale of the PPI policy

• PPI was agreed to as it was thought that it would increase the chances or was a condition of being approved for credit
• The policy was unnecessary as through the consumer’s employment, there was sufficient cover already in place, i.e. Armed Forces
• There was a pre-existing medical condition that meant the PPI policy was invalid
• It was not made clear that interest would be payable on the PPI policy as if it was added to the loan
• Consumers were pressurised into taking out the policy
• Advisers failed to fully ensure that the consumer understood they were purchasing an insurance product
• It was not made clear that PPI was entirely optional
• It was added to the loan/credit agreement without the consumers knowledge
• The policy would end before the length of the loan/credit agreement finished

The redress scheme that is used takes into account the views and material from the FOS, FSA, former Ombudsman schemes and other relevant regulators.

The consumer needs to be put back into the position that they were in had the policy not been taken out. This is broken down into the different types of PPI policies:

• Cancel the remaining policy;
• The credit card provider must calculate the current balance of the credit card had the PPI policy never been taken out and compensate the customer with the difference. This includes any interest that was charged on the policy premiums any associated charges and their interest charges had the PPI not been added onto the account;
• Interest at a rate of 8% per year should also be paid for any credit balance at any period where the recalculated account would have been in credit.

• Refund all premiums that have been paid
• Pay the consumer interest at a rate of 8% per year for the loss of use of their money

In all circumstances, the lenders/providers may also be ordered to pay compensation for distress and inconvenience that has been caused by the mis-selling of PPI.