PPI – What the Lenders Did Wrong
By now many people will have heard about PPI – payment protection insurance – and the scandal surrounding it. But some people might not quite realise just what the lenders did wrong – shouldn\’t customers have known that this product just wasn\’t for them? On the contrary, the lack of information given to customers about PPI while applying for a loan was precisely the main problem.
The problems started when staff working for the lenders were given high targets regarding the selling of PPI. Rather than offering PPI to customers who would benefit from it, they tried selling it to everybody, regardless of their needs. The reason lenders were so keen to sell it to everybody was because of the very attractive profits it reaped.
However, the profits were only so high because the product was so useless to many of the customers it was sold to. Firstly, the terms of the insurance would have made it useless to many people – self-employed, retired and unemployed people would usually be paying for insurance intended for employed people for example. Secondly, the cost of the insurance was often more than the interest on the loan itself – and claims for many insurance policies could only be made for a year, even if you were still paying the premiums!
If the lenders had been upfront about this they\’d have done nothing wrong. Then again, nobody would\’ve wanted to buy PPI. So instead, they misled customers – making them believe the insurance was necessary for the loan to go ahead for example, or not even making it explicit that the insurance increased the overall cost of the loan. Without this crucial information, many customers weren\’t able to refuse PPI when they would have wanted to.
It is not just the fact that lenders swindled millions of customers out of billions of pounds over many years that has disgusted their customers – it is the fact that they did everything they could to stop customers getting back what was rightly theirs. While regulations have since been toughened – much to the disappointment of the banks – many customers will find it hard to trust banks ever again.
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