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Examining Mis-Sold PPI And It's Effect On Personal Finances

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The possibility exists that substantial refunds are available to anyone who has obtained a loan, credit card or buying card from a store for the last six years. This is as a result of the great number of Payment Protection Insurance (PPI) contracts that were issued to accompany this type of product. Many people availing themselves of these services may well have been mis-sold PPI.

A payment protection policy is a useful product to have. It can safeguard loan repayments, for a year at least, in the event of the owner becoming ill, having an accident or becoming unemployed. Problems are experienced with the methods used by the finance companies to sell the products. These companies issue their employees with instructions to sell the policies or face financial penalties.

On many occasions, the client is informed that the policy is compulsory. This is simply not true, which, on its own, is mis-selling. In all probability, those people who are unemployed, self-employed or retired and who may already have cover for the aforementioned conditions, have been sold these policies unnecessarily. It is possible that a person may have one of these policies without knowing about it, although because of stricter regulations in recent years this is very unlikely. However, loans still active from many years ago may have been sold like this.

A client will often call their bank to request a quote for monthly installments on a loan they may need. The banks' representative then gives the customer the quote while at the same time telling him that he is receiving a fully protected loan. This just means that the loan comes with a very expensive insurance policy. Most clients will be unable to calculate the various components of a loan in their head, but if the amount sounds reasonable, they will agree to it and will then be mis-sold PPI.

Loans themselves are not the real profit generators. A huge profit is made from the combined loan and cover policy. After a 15 month investigation, in June 2008, the Competition Commission revealed how much money was being made from policies by examining what the public was paying in for their cover, against what was being paid out. The cost of insurance is normally a lot higher than interest charges, but insurance companies do not reap these benefits, the companies who sell the products do.

If a person has been mis-sold PPI, the chances are that they were not given complete details about the product they were purchasing. Among the ploys used by financial institutions are telling the client that the cover is compulsory, not even telling the client about the policy, not inquiring whether the client is already covered by another policy. Lenders are obliged to inform customers about specific details of any policy and to make sure that it is what they need.

A client who thinks they have purchased a policy without full disclosure is entitled to a refund. A letter is written to the company which will then reject the claim using technical terms. The average person gives up here. Being persistent and mentioning the Financial Ombudsman Service will sometimes elicit a positive response.

Most of the claims adjudicated by the Ombudsman are settled in the clients favor. If the client is successful in his claim, the chances are that his policy will be cancelled if it is still in force so clients should be aware of this. This article has only scratched the surface of the information available to those who have been mis-sold PPI.
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