Banks Receive PPI Compensation Setback
Posted: 26th April 2011
The long-running battle between banks and their customers over alleged mis-selling of payment protection insurance (PPI) plans took another step forward last week when the High Court dismissed a challenge brought by the banks that guidance on such policies issued by the Financial Services Authority on sales of insurance did not apply to PPI policies.
PPI policies were sold aggressively by banks to customers who took out loans. They insure the person taking the loan against redundancy and illness, with the insurer covering any loan payments due during the period of incapacity or unemployment. The cost of the policy was normally added to the loan on day one, meaning that if the debt was paid off early, premiums had been paid unnecessarily. Typically, a PPI policy would add more than 20 per cent to the loan.
The move paves the way for customers to receive refunds of premiums paid. However, an appeal by the banks is likely and, even if unsuccessful, the estimated £4.5 billion cost will inevitably end up being met by the current customers of the banks, most probably through the demise of free bank accounts.
If you have suffered a loss through being mis-sold a financial product, you may be able to obtain redress. Contact us for advice