Internet Guide Logo

Payment Protection Insurance (PPI)

Last Edit: 27/06/13

Payment Protection Insurance (credit insurance / loan insurance) is a financial product sold in the United Kingdom which covers loan repayments in the event a person suffers from: illness; loss of employment; or an accident.

Banks had to make large PPI repayments to consumers they mis-sold PPI too
(Pictured: Many high street banks set aside funds to pay for PPI claims.)

As a financial product, there is nothing intrinsically wrong with it, but it was found by the Competition Commission (2011) to have been poorly regulated and new rules were set in place (2012) to help avoid mis-selling. You may wonder how or why it was mis-sold? greed by financial institutions, with bank staff offered bonuses and pressurised by management to sell PPI with loans, mortgages and credit card debt. Hilary Osborne, in TheGuardian (2012), reported how a "former NatWest employee described how branch staff were pushed into selling unsuitable payment protection insurance". While PPI may have made sense for some consumers, for others it did not, and many consumers were basically sold a worthless financial product. Banks were not the only businesses to mis-sell PPI: it was also mis-sold (packaged) with catalogue debt and store cards.

PPI began being sold in the 1990s, and the first PPI court case -- initiated by a claimant -- was in 1992-93 (Bristol CC 93/10771). The case involved L W Price v TSB Bank PLC, and the case was won by L W Price. However, due to a ten year nondisclosure clause, the issue of PPI mis-selling went largely unnoticed, but when a copy of the judgment was eventually released, it led to the current 'PPI claims industry' that helps UK consumers to file claims for PPI payments -- assuming they had been mis-sold. Consumers can file a claim themselves, or can employ law firms who provide a "no fee" claims handler service -- they usually charge 30% of any PPI reclaimed. To make a claim, consumers usually needed to meet the following criteria: they didn't know they were sold PPI; the PPI would help their loan application; or they were told it was mandatory to the product sold. However, the result of the Plevin case -- a case brought by Susan Plevin to the UK Supreme court, heard by justices Lady Hale, Lord Clarke, Lord Sumption, Lord Carnwath, Lord Hodge, and titled 'Plevin v Paragon Personal Finance Limited -- may mean far more people can make a PPI claim, with the general belief that this court case lowered the criteria of making a PPI claim.

Update: A final deadline date of 29 August 2019 has been set by the Financial Conduct Authority (FCA) to make a PPI complaint.