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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.

It’s perhaps not surprising that banks put their own profits before the interests of their customers, but the extent to which they did so may be. It was the aim of the banks to sell PPI to as many as people, regardless of whether they needed it or not because of the huge profits they generated. Therefore staff were encouraged to sell PPI to customers with ambitious targets.

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!

While there is nothing wrong or illegal about selling a truly awful product, it becomes a problem when companies try to cover up just how awful it is. The two biggest failings were not explaining the extent of the insurance exclusion and in some cases not even disclosing the fact that PPI carried an additional cost. By withholding such important information that customers would have needed to make an informed decision, PPI was mis-sold to millions.

Many customers are rightly angry not only about what the lenders got so badly wrong, but that they refused to acknowledge they had done anything wrong. Their stubbornness was confirmed by them dragging their feet over handling complaints and attempting to challenge court rulings. But despite just how wrong the lenders got it, the authorities have decided that they simply have to do all they can to finally do right by their customers.

Want to find out more about mis sold PPI?

The increased exposure on the subject of PPI mis-selling has resulted in affected customers from around the country being made aware that they were capable of claiming for the billions of pounds they are collectively owed. Consumers have been able to claim thanks to regulatory bodies such as the FSA and consumer groups like Which? drawing attention to the ways in which banks sold PPI to customers through deceptive means. Tighter regulations and court rulings have meant that the companies responsible for selling PPI have had to amend their mistakes and a high proportion of claims are now successful.

The reason so many consumers have been able to claim is because so many PPI policies were mis-sold. Lenders often failed to inform customers about limitations in the policy, which would have made it all but useless, and they often wrongly implied that PPI increased the chances of successfully getting a loan. While the banks initially challenged rulings that forced them to seriously consider consumers misgivings, there is now no room for them to get out of paying legitimate claims.

Plenty of people have been able to make the claims on their own, particularly in cases where there was only a single policy, they still had all the relevant paperwork and it was easy to prove that the policy had been mis-sold. And with average pay-outs of around 2,000 if you’re in a similar position you shouldn’t delay.

Others find they simply don’t have the time or don’t want to deal with the stress of doing it themselves – they might have misplaced their policies or be unsure about how much is owed to them and not feel confident about making a claim themselves. In these cases, consulting a specialist who deals with PPI claims daily could make all the difference. And you still won’t have to worry about it costing you anything because they often work on a no-win no-fee basis.

With an average payment of almost 2,500 there’s no reason not to attempt claiming back money that you should never have paid in the first place. And if you let a PPI claims agency do the work for you then you won’t even have to worry about spending any time on the case.

Could you reclaim PPI?

Payment protection insurance – PPI for short – is a type of insurance used to protect loans in the event that the person repaying the loan loses their job or becomes unable to work. While it may sound like a reasonable enough financial product, the truth is that it has been mis-sold to millions of customers. With many people now claiming billions of pounds back from the lenders, PPI has become a headache for both consumers and the credit industry.

A common way that PPI was mis-sold was simply by not letting the customer even know they were buying it in the first place. PPI was tacked on a loan by presenting it as a ‘fully secured loan’. On other occasions customers would not have been made aware that due to their situation – they may have been unemployed or retired for instance – PPI would have been useless.

But the important thing now is that hundreds of thousands of people have already made successful PPI claims and that hundreds of thousands more are still entitled to claim. Due to the huge needs of people who want to make a claim but don’t know how to, PPI claims agencies have sprung up. The large number of agencies keeps rates low and professionalism high, although the customers themselves can of course make claims.

Despite the fact that PPI was mis-sold to millions of customers it wasn’t mis-sold to everyone. Does this mean that it is a useful product for some people’s circumstances? Perhaps, but it is much more likely that there is a financial product out there that is more suitable for you. Talking to an independent financial advisor is your best bet. If the whole PPI scandal has made you extra cautious speak to several advisors, friends and family – just don’t rush into anything.

Little good has come from the PPI embarrassment, but if it has reminded customers of being extra cautious when it comes to dealing with anybody that wants your money we can be grateful for that at least. And fortunately, it has worked out well for consumers in the end, with industry experts suggesting the banks will be paying back anywhere from 5-8 billion over the coming years.

Find out more about the PPI Claims process and whether you could be eligible.