PPI scandal started many years ago but this mystery was unfolded recently. About 3 million people have lost about £4.5 billion in this scandal.
It all started when Lloyds Banking Group set aside £3.2 for compensation. They were going to compensate consumers who were mis-sold PPI policy. This unearthed the whole process of mis-sold PPI that started many years ago. This is a popular matter now as the high court has ruled out that lenders must compensate the customers who were mis-sold the policy.
How did it start
This gives you an opportunity to claim your compensation even if you have already completed the payment. It started in 1990s and you only need to look for your papers and check whether you have a claim to make. PPI policy was commonly sold together with bank loan, mortgage or credit card.
It is a protection method if you are unable to pay your borrowing in case you are sick or lose your job. However this policy is not supposed to be sold to people who are unemployed, self-employed or students.
The banking industry started selling this policy after they discovered that it was highly profitable. Banks such as HBOS and Barclays were making large profits from this business. In 2004 a lot of people were complaining about high amount of money they were losing because of this method.
Only 15% of people were compensated when they complained to the bank. This left about 85% customers who were not satisfied. Vince Cabel, who was then the Liberal Democrat Treasury spokesman, started an investigation on the matter.
It was in 2005 that financial Services Authority (FSA) started sorting out this confusion. It was after regulating the general insurance industry that they wrote to the heads of Britain’s banks about this issue at the end of that year. The matter did not end there that they began imposing fines on mis-selling PPI in 2006.
The first company to feel the wrath was Regency Mortgage Corporation who was penalized £56,000. FSA said that the Regency had mis-sold this policy to people who are asking for mortgage. This trend continued as another company Liverpool Victoria Banking Services were also fined £860,000 in 2008.
The reason why they were fined is because they were adding PPI to customer’s loan without their knowledge. Another company, Alliance & Leicester was also fined £7 million. They were fined because their staffs were intimidating who questioned PPI inclusion in their quotation.
In 2008 this scandal increased even more despite the penalties. It was discovered that a third of PPI customers had mis-sold policies. Personal finance campaigner Doug Taylor said that they knew that businesses were mis-selling PPI but they were amazed at the rate which it was being sold.
He said that bosses were chasing their profits and salespeople were looking for more commission. This left the customer at a very disadvantaged position. Customers who were looking for a mortgage, loan or credit card were forced to take this policy. In 2011 High Court ruled that mis-sold PPI must be compensated.