Do you have a Loan? It may well have Payment Protection Insurance (or PPI) which is failing many of those who need it most, adding to their debts instead of protecting them against hard times, a report from a national debt charity has found.

The report found that Payment Protection Insurance, which is sold to cover credit payments in the event of illness or job loss is often very expensive, mis-sold to people who cannot possibly claim on it, and designed to exclude many of the most common situations that can lead to debt problems.

There are an estimated 20 million PPI policies in force in the UK producing annual revenues in excess of £5 billion for the insurance companies. The report concluded that Payment Protection Insurance was more about providing an additional source of profit for the financial industry than protecting consumers.

Problems occur in nearly all sectors of the consumer credit market – from non-status mortgage lenders and hire purchase companies to major high street banks and credit card companies.

Lenders who sell Payment Protection Insurance with Personal Loans include:

PPI Claims

The insurance premium paid can be as high as 40% of the value of a loan and has to be paid for by borrowing more. It is common for interest to be charged on PPI premiums in credit agreements.

Borrowers are often sold completely inappropriate policies when they take out credit agreements. In many cases high pressure sales or inertia selling are used to force people to take out insurance that they cannot afford, do not want or need, and cannot benefit from.

“If you think you may have been mis-sold Payment Protection Insurance contact Pinto Potts Solicitors who are PPI Claims Specialists, claims are handled on a No Win, No Fee basis.”

Contact Pinto Potts Solicitors for immediate advice on a Mis-Sold PPI Claim

PPI Policies sold by several well-known mainstream lenders have been found to exclude cover for common problems like bad backs and mental health problems that can stop people working. Many also have arbitrary age limits and ban the self-employed and those on fixed-term contracts from making a claim.

Even where people are able to make a successful claim, the amounts paid out do not guarantee to keep them free from debt. Some insurance only pays out for a year, and then only covers minimum payments.

Delays in the payment of claims can trigger spiralling debt and administration charges, leading to borrowers being pursued by debt collectors and the threat of court action.

Bad practice in the sale of Payment Protection Insurance is also often linked to irresponsible lending. Cases have occured where consolidation loans advanced to borrowers already in financial difficulty are rolled over several times, with a new PPI policy sold each time, increasing the debt significantly.

Examples of Claims: PPI Compensation

A lady in Cornwall who had taken out a secured personal loan with her partner. They had since separated and she was now struggling with the repayments. Although the client had signed the application and received a copy, she was unaware that the cost of the PPI premium increased the loan from £17,800 to £22,962, and attracted interest at the same rate.

A Surrey man had been sold a loan protection plan although he had long-term mental health problems. An additional £2,200 was added to his £8,900 loan for the PPI. At the time of signing the agreement the client was very unwell and was not aware of what he was signing. The bank was aware of the client’s situation and that the client might not be eligible for the insurance protection policy.

A Worcestershire couple in receipt of income support were sent pre- approved applications for a credit card with a credit limit of £600. They accepted the card but were then pestered to take out insurance, despite repeatedly saying that neither of them were in work. The credit card provider said that it would provide cover in the event that the card-holder did get a job.

Top tips on Payment Protection Insurance include:

1. Decide whether you actually need this insurance. It’s costly and may well not be worth it.
2. Always read the small print and make sure it’s right for you. Check before signing any credit or car finance agreement that PPI is not included automatically – it should always be optional.
3. Check out the common exclusions to make sure that you and all your circumstances are covered.
4. When taking out a loan or a credit card over the phone always listen carefully to what you are signing up to.
5. Always ask the insurance company for a copy of the payment protection policy, this is either the summary of cover or a certificate
6. Check to see if your life assurance is a cheaper way of making sure that a loan will be repaid if you die. Your employer’s sick pay scheme may be enough to cover repayments should you become ill.
7. Be aware that insurers can reject claims on the basis of age, self-employment, pre-existing medical conditions, mental health problems and disputes about medical conditions.
8. Always check that the insurance will cover the whole debt.
9. Make sure you know who your insurer is and how to contact them in case you need to make a claim.
10. If you think you have been the victim of mis-selling or find your claim is refused unreasonably, speak to a specialist. Pinto Potts Solicitors are experts in Payment Protection Insurance and will aim to achieve a full refund of the PPI premium, plus interest, claims are handled on a No Win, No Fee basis.