Payment Protection Insurance is also known as credit insurance or loan repayment insurance. It is sold along with loans and overdrafts by banks and credit companies. It covers a variety of different types of loan such as car loans, mortgages and credit cards. It is a kind of insurance which will cover the consumer in the case of the loss of a job, illness, disability, death or any other circumstance which would mean that the borrower was unable to earn in order to repay their debt. It usually covers the consumer for a period of 12 months and after this they will need to find their own means of repaying the debt.
It has recently emerged that there has been a huge amount of Payment Protection Insurance policies which were fraudulently sold to people. The payment protection insurance tended to bring in far more capital for the credit companies and banks than the actual interest from the loans themselves.
Credit companies and banks often sell the product at the same time as the overdraft or loan and often only specified in the sales script that the loan was "protected". They failed to mention anything about what the insurance was or how much it was going to cost a consumer. For this reason many consumers were totally unaware that they even had this type of insurance. If customers did ever ask any questions about the insurance some companies even falsely stated that it would improve people's chances of getting the loan or that it was compulsory to get it.
In April 2011 it was decided in court that the allegations of the mis-selling of payment protection insurance were correct and many large companies were fined huge amounts of money.
These companies include Alliance and Leicester, Capital One, Egg and HFC.
There are also a number of new rules which have been set up which credit companies and banks must now abide by when selling Payment Protection Insurance. A quote and information about the policy must be given to the consumer. It is no longer legal to try and sell the policy at the same time as the setting up of the loan or overdraft.
There are now a number of different companies which have formed in reaction to this which offer advice and help in making a claim with regards to mis-sold PPI. These companies usually work on a no win no fee basis. They will do all the work involved in order for you to regain any mis-sold PPI payments which you made.
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