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Monday, August 26, 2013

PPI Mis Selling - The Latest Hit to the Loan Market


PPI mis selling can be termed as the latest problem in the loan market. It has every body in a tizzy, both loan seekers and loan givers (the banks and the insurance companies) and the rising number of PPI claims has disturbed the working of the banks all over. Still, the practice has continued and has only stopped (or more likely, slowed down) in May this year when the court ruled in favour of the customers and advised the banks to repay the customers for mis-sold PPI.

In such a situation one may ask a very relevant question - why were these PPIs mis-sold in the first place and another, how have they been mis-sold?

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The answer to the first one directly relates to the compulsive urge of the banks to maximise their profits. It is the same reason that caused the financial crisis of 2009 and other financial problems here and there. Most banks earn their profits not from the loans they sell but the insurance policies they sell along with the loans. Hence, it is not surprising why the salesman that sells you the loan is so eager to push for the PPI. Their jobs and incentives are so dependent on you taking the insurance policies that they do not care whether they follow the procedure to sell you the right policies or not.

Answer to how they do it is a little tricky. The simple answer is that they do it right under your noses while explaining to you the intricacies of the loan. Because the jargon is so unfamiliar and because most of the times you are in a hurry to get the process over with, you do not notice what you sign up for. This negligence is what the banks take advantage of.

PPI mis selling happens at all places where loans are offered. On the internet, there are small little pre-checked check boxes which make you accept PPI unless you opt out. In other words, you have a PPI unless you opt out of it. These can be difficult to reclaim too since all the conditions are laid for-all-to-see on the internet and only you are to blame for any negligence. However, you can still have a case as this is not really a best practice for banks to follow.

Another case might be that you take the loan in person but are told that PPI is important for your loan to be approved. You might be forced to take up the loan or be pushed to agree to the terms and conditions that include the PPI. Understand that though the PPI is an important policy for your loan payment in difficult circumstances, it comes with its own conditions and not everyone is eligible for one. For instance, you cannot take a PPI if you are unemployed or self employed, have a medical condition uncovered by PPI or are covered by some other policy that you already have. Hence, if you feel pressured by the loan agent into taking a policy, ask yourself these questions.

Even if you don't tick yes on all the above conditions, you can still refuse the PPI because you can get one from a different bank which gives you a better quote. Hence, it is in your hands to not succumb to such mis-selling of PPIs.

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