PPI & ASU Claims on Loans
Payment Protection Policies (PPI) covers loan or credit card repayments in case of accident, sickness or unemployment. These are also known as Accident, Sickness and Unemployment cover (ASU), Life & Accident, Sickness and Unemployment cover, Mortgage Payment Protection Insurance, Personal Loan Protection or Credit Card Repayment Protection.
If you have a mortgage, loan or credit card then there is a chance you also have a PPI policy. We may be able to reclaim £1,000s on your behalf.
There is nothing wrong with PPI policies for those who need or want it. However, policies have been systematically sold to many people by 'attachment' to loan agreements. A good sales process should fully inform you of the costs, advise you the policy was optional, give you full details and policy documents, ask about any pre existing medical conditions you may have had, ask about your employment status and much more. However, in practice, these policies were often mis-sold without investigation into customer's circumstances.
The Competition Commissioner's January 2009 report cites the vast majority of the UK's more than 12 million PPI policies are sold at the same time as a consumer takes out a loan, credit card or other type of credit. Typically, lenders make money from selling these policies by way of commission from the insurance providers. Often people are surprised to know these policies have been attached to the loan agreements, or that loans have been taken out to pay up to five years premiums in advance for these policies. The cost of these policies should be reflected in the APR. The fact that payments include PPI, is often missed.
Payment protection insurance can also be staggeringly expensive. The Citizens Advice Bureau reports lenders are squeezing extra loan business out of borrowers who are paying over the odds to protect themselves and the creditor, if their circumstances change. Two different estimates suggest that PPI premiums are about three times the cost of providing cover. This implies that borrowers could be over charged by as much as £3 billion per year for PPI cover. PPI premiums paid by CAB clients represent anything from 13 per cent to a staggering 56 per cent of the amount loaned. It is common for PPI on loan agreements to be paid for by a one off premium included in the loan itself and for interest to be charged on PPI premiums.
The True Cost of a Loan
If you get a loan with insurance, the interest rate (APR) determines the actually cost of the loan? Wrong, if say a £5,000 loan is sold with a PPI policy costing £1000, then that's like adding 20% to the cost of the loan when the loan APR may have been half this.
Lenders already fined? See case studies