There is a category of insurance that you may be paying for and not even know that you are. Kind of makes it hard to file a claim. Oh, you say, I know about all insurance policies I hold. Do you? Do you know that Payment Protection Insurance, under a variety of names, is included in the vast majority of loan, mortgage, financing (car loans, major appliances, and etcetera), overdraft and line of credit contracts? If not, this is your chance to learn a bit about Payment or Credit Protection Insurance.
Payment Protection Insurance, which is what this product is called when sold by banks and finance companies, or Credit Protection Insurance when it is sold by credit card companies, are supposed to make your payments for you if you become unable to make your payments due to such things as job loss, injury or sickness. The payments part of your monthly payments.
If not part of your monthly payments, it does not mean you have not bought this insurance product: it likely means you paid for the entire policy, known as a Single Pay Policy, up front and had the cost added to your loan. That means you did not just buy it: it means you borrowed the money to do so and are paying interest besides. It is a legal requirement under the consumer protection regulations governing the insurance industry in the United States that those who sell insurance inform consumers of the parameters of all insurance products at the point of sale.
These kinds of issue came up repeatedly when the agency that monitors the consumer insurance industry in the United States investigated the PPI and CPI categories of insurance products. The investigation was ignited when a higher than normal amount of complaints, compared to consumer insurance product complaints in general, were noted in the credit and payment protection insurance categories. The investigation revealed widespread mis-selling and misrepresentation was involved in selling such policies to consumers and a number of financial firms were fined as a result.
A pattern was discovered in how the mis-selling takes place. To begin with, insurers pay out a commission to banks and finance companies and mortgage brokers and car financers when they sell a policy as part of a loan agreement.
It is not that there is anything inherently wrong with a lender wanting you to buy insurance on the debt. But there is definitely something wrong when the commission the lender makes on the sale of the insurance policy is greater than what the lender makes on the loan alone.
When a substantial portion of the return on a loan is realized by getting the consumer to agree to also purchase an insurance policy, the lending party is acting primarily as an insurance agent, not as a financier.
In many cases loan companies, banks and other lending institution simply, include payment protection insurance as administrative factor in the cost of the loan. This subtly tells people that they have no choice; they either buy the insurance or lose the loan.
Simply sliding the contract by the consumer is not the only strategy used. A particularly objectionable tactic is misinforming the consumer that PPI purchase is required in order for the loan to be made.
Want to find out more about making PPI claims? Then visit www.PPIClaimsUK.co.uk and find out how to start your mis sold PPI claim today.
categories: personal finance, credit cards, loans, ppi claims, ppi claim, ppi compensation, mis-sold ppi, mis sold ppi
