How Are Ppi Refunds Made?

Payment protection insurance refunds, commonly called PPI refunds, are currently being issued to consumers in the UK after it was discovered that many large banking institutions had mis-sold PPI. PPI itself is a form of cover that is purchased by the consumer when he or she takes out a loan, credit card, or mortgage. Should the borrowing consumer become involuntarily unemployed, or have an accident or illness that causes them to be unable to pay one or more instalment on the loan, PPI is used to pay that bill for them until they are again able to pay.

For some customers, particularly in the current economy, PPI was a valuable and necessary cover. What went wrong with PPI then? The PPI was mis-sold by lenders to customers even when lenders knew the customers did not need the cover, or worse, were completely unsuitable to the customer’s needs. Plus, in many instances the PPI sold by a lender had poor value for the purchase price, and many were sold at a profit margin far above the cost to the underwriting companies.

The Citizens Advice Bureau launched a super complaint in 2005 that launched an investigation into the practice of selling PPI by lenders. In addition to the complaints above, the bureau had criticism of the way in which lenders were selling PPI as well. The complaint turned into an investigation, and banks and lending institutions put out settlement funds for customers. These are called PPI refunds.

In order to determine whether a customer will qualify to receive a refund, many legal firms specialising in PPI claims have set up websites and information hotlines to determine if the customer was mis-sold. After determining whether the customer’s complaint is valid, a case file is created. Many legal firms now offer “No win, no pay” services as well, so that if they find that a customer has a valid claim but fails to win settlement funds, the customer will not owe any legal fees to the firm.

Legal firms therefore have to be solid in choosing whether to take legal action on a specific case. While some mis-sells are clear cases where a family home was lost or a carefully cultivated credit rating was destroyed, such extremes are actually not necessary in order to win a claims case. Below are some common types of mis-selling that will in most instances qualify a customer for PPI refunds:

Firstly, customers who were sold a PPI without an explanation of the terms and conditions. This is a forefront mis-sell, since lenders who did not explain the terms and conditions mislead thousands of unsuspecting borrowers into believing they were covered when they were in fact not.

Lenders added the PPI to the cost of the loan without notifying the borrower that this was being done. Since the customers in this situation did not consent to the cover, they were also not aware that they may have qualified to use the cover.

Other reasons include costs of the PPI were not well-explained. Ineligible customers were still sold PPI. Further, many were only notified of their ineligibility when they made a claim. All customers who have purchased a PPI are strongly encouraged to contact legal advice to determine eligibility for PPI refunds.

By: Vincent A Rogers

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Vincent Rogers is a freelance writer who writes for a number of UK businesses. To learn about PPI refunds, he recommends Randall and Vickers Ltd.