PPI Explained: What Is PPI?

Payment Protection Insurance (PPI) has been in the news a lot over the past few years. You will probably have noticed adverts on the TV and on the internet about making your PPI claims. However, many people across the UK still don’t know what PPI is.

PPI was essentially an insurance policy that was taken out against credit that allowed the debtor to have payments made should there be a reason for them to be unable to make that payment. Depending on the policy, the payments against credit owed could be made if a person lost their job, became too ill to work, and some other circumstances. This all sounds good; the problem was that too many people had been mis-sold policies and didn’t know what they were paying for.

What types of PPI were there?

There were two types of PPI that were sold. Some PPI policies had the premium added to the cost of the loan. The borrower would then pay back the PPI costs during the payback period on the loan. They would also pay interest on the PPI. This was known as a ‘single premium’ and this type was banned in 2009.

With other loans, which include mortgages, those seeking credit paid for the PPI as a monthly fee. Credit cards were also paid for as a monthly premium and this was often added onto the credit owed each month to the credit card company. This type of PPI was often a percentage of the total credit balance. So, the more the borrower owed, the higher the premium was for the PPI.

What was PPI sold on and by whom?

PPI was sold with many credit products by lots of different financial companies. Some of the most common credit products that PPI was sold on include mortgages and credit cards. However, car financing, small loans, store cards, business loans and purchase-lease agreements are other examples of what PPI was sold with.

Essentially, if you took any credit out before, you might have had PPI sold with your product. One of the biggest problems with PPI is that many customers didn’t know that they had been sold PPI. This is one of the reasons why PPI claims are now being made against these companies.

Some of the ways that PPI was mis-sold include:

* You had declined to buy a PPI product, but it was sold to you regardless.
* The sales representative didn’t explain to you that you were buying a PPI product at the same time as credit.
* You were told by the financial company that you wouldn’t be accepted for credit without the PPI product.
* For any reason, your PPI product wasn’t explained to you fully.
* The commission that was part of the PPI has sometimes deemed to be unfair.

Is PPI named anything different?

Some companies used different names to sell PPI. For instance, some credit card companies called it credit card repayment cover or credit repayment protector. Some mortgage companies called their products mortgage repayments protector or mortgage care. Other names included: credit care, loan guard and payment protection cover.

If you were sold any of these products without your knowledge, consent or with the proper information, you can make a PPI claim.

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