UK banks were hit today by a judicial review which means they may now be forced to pay back approximately £3 billion to angry mis-sold payment protection insurance customers.

Payment Protection Insurance, commonly abbreviated to PPI, is a type of insurance sold to people who take out any form of loan such as credit card borrowing, mortgages. The insurance is designed to make repayments for the policyholder in case of non-payment of instalments due to illness, an accident or other similar circumstance.

Banks and other lending institutions have been selling these policies as an add-on to their main products to consumers who, in many cases, didn’t need the cover or couldn’t make use of it they did. In some cases, the policies were sneakily added into over-the-phone lending quotations, using innocuous sounding words such as ‘…and your fully protected monthly repayment would be…’ with the two words ‘fully protected’ silently including the PPI cover. This is just one of the many ways in which over 2 million customers unwittingly took on insurance cover which they either did not need or which would have been completely useless to them if they ever needed to fall back on it.

The issue came to light around 3 years ago but it is only recently that PPI claims have gained sufficient momentum to force the banks to refuse refund claims. For a time refunds were being made but then the banks decided to challenge them so they stopped paying out.

PPI reclaims have been on hold since October last year but now the path has opened for them to proceed and for mis sold PPI consumers to be refunded.

From today the banks and lenders will now be forced to deal with all their past mis-sold PPI policies which will potentially cost them billions. An appeal by these institutions is now likely, only time will tell whether it helps them or the consumer.

In any case, today is a happy day for mis sold ppi consumers who now have a greater chance of getting their money back. Many of these people have paid several thousand pounds in un-necessary insurance premiums. The average amount stands at around £2000.

 


 

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