Payment Protection Insurance-What Consumers Need to Know

18 Apr

Payment protection insurance, ofter referred to as PPI, is a policy which covers debt or loan repayments in the event the debtor is made redundant or unable to work due to an illness or injury. Many policies of this type are offered and the benefits vary from plan to plan. When a consumer takes out a credit card, mortgage or loan, payment protection insurance may be sold. In some cases, this policy may also be sold separately. Recently, it has been discovered that many of these policies were not sold properly.

Payment protection insurance was ‘mis-sold’ in a number of situations. If a consumer did not understand that he or she was purchasing a policy that was not wanted, the policy is considered to have been mis-sold. The same is true if the policy was not properly described to the consumer at the time of purchase. If the consumer did not understand what was being purchased and that it wasn’t suitable for them, it is considered to have been mis-sold. Another situation where this may arise is when the the consumer didn’t understand how the policy worked at time of purchase.

A consumer who was mis-sold a policy needs to first contact the company which sold the policy. This may be a bank, a building society, a credit card company or a mortgage lender. In the event the consumer does not know who to contact, the financial ombudsman may be able to assist. He or she will attempt to determine which company is involved. The complaint will then be forwarded to the correct person at that company so the situation can be looked into.

It is the responsibility of the person or company selling the policy to ensure the consumer understands what is being purchased and how the policy works. Policies of this type cannot be sold without the consumer’s express permission. The payment protection insurance cannot be automatically added. As a result, many consumers are now owed refunds for these policies which were mis-sold. Any consumer who believes he or she may have a mis-sold policy should contact the lender. Only in the event the situation cannot be resolved by dealing with the company involved will the ombudsman become involved.

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