In the United Kingdom, payment protection insurance or PPI is an insurance product that covers the repayments for outstanding debts and loans. The types of debts and loans that may be covered by a PPI are mortgages, personal loans, and credit cards. The insurance covers for these repayments in case the policyholder gets sick, encounters an accident, or is made redundant or laid off at work.

Why Do People Get PPI?

People get PPI to protect them from being buried in too much debt. The PPI also protects their mortgages, particularly their homes from being foreclosed. When people are unable to pay for their debts, there are usually some severe consequences, one of which is losing their homes, or losing a collateral that they attached to the loan like their cars. When people are protected by PPI, their debt repayment will be covered for a period of one year in case they are unable to pay for it.

How Does Debt Repayment from PPI Work?

When you apply for a PPI, you will get an insurance for one year, or depending on the agreement. Within this period, when you get sick or become unemployed involuntarily, the bank or insurance company will cover a percentage of your outstanding debts and loans for 12 months. Usually, this will be given out as a lump sum money, which you can utilize for other means. The wisdom behind the 12 months coverage is that the policyholder is expected to have found a new job within a year of being laid off.

What is the PPI Controversy?

The PPI controversy is an issue that began sometime in 2007 when complaints about the PPI rose. Consumers are blaming the banks for allegedly mis-selling PPI. Many consumers have complained that they didn’t know they were sold PPI. The banks who sold PPI actually told the people that PPI is a compulsory product that comes with the loans and mortgages they were applying for. Many people thought that PPI was part of the loans they took out, and paid for them unquestionably.

According to the Consumer Protection Code, two different financial products must be quoted separately. The banks overlooked this basic requirement for every transaction. Many Britons who took out the policies were not aware that they had PPI. Consumers have organized themselves and started an online campaign to urge people to refund their PPI policies.

How to Make a Refund

The first place to go to make a PPI policy refund is the originating bank who sold the policy. However, many people are being denied the refund because they are not eligible. Only people with sufficient grounds for PPI refund are entertained. The Financial Ombudsman Service or FOS provides assistance to those who think they were mis-sold PPI by the banks. An estimated 80% of the PPI disputes are awarded to the policyholders, which is why many people are encouraged to refund their polices.

If a policyholder thinks that the banks are not entertaining their complaints, the alternative option is to file the complaints in the FOS, and the government agents will be the ones to process the complaints. However, because of the sudden surge in PPI complaints from the years 2008 to 2010, the FOS has backlogs that are pending for over a year. This is normal when filing complaints at the FOS.

Claims companies are another option when people want to make a PPI refund. Like the FOS, they will process the PPI documents and file cases in the small courts to refund the said policies. Policyholders are required to submit a form in order to determine their eligibility for a PPI refund. This is standard when people go to the banks, the FOS, and the claims companies for PPI refunds.

Make sure to follow the guidelines of making a refund that will be provided by the respective banks, the FOS, and the claims companies because this will facilitate faster processing of your papers.