Scrapping Single PPI
The heavily mis-sold PPI policy known as 'single premium PPI' has been scrapped for the most part with financial giants Barclays, The Co-Operative Bank, Lloyds Banking Group and RBS/Natwest having pulled out of the practise. This decision was welcomed by many consumer orientated organisations which had long lobbied against the product due to its shady features.
To put the situation into proper context it should be made clear that there are two forms of payment protection insurance: regular premium and single premium. Regular stipulates that the cost of the PPI is added to your monthly payments and is fairly standard practise. Single premium PPI stipulates that the total expense of the insurance, over the duration of the loan, is added to the amount loaned. In other words, the interest of your PPI is gathering interest off of the primary loan leading to an outrageous extra cost.
The whole cost of the PPI is added to the borrowed amount right from the beginning, therefore the borrower is in essence paying interest on the cost of the insurance. In most cases this amount ends up being far higher than the interest on the primary loan itself. If the consultant at the institution explained that the PPI would more than double the total interest and that the customer would be required to pay, no one would accept it. This is why the policy is considered mis-sold insurance, due to lack of fair and thorough disclosure of the facts.
Generally speaking the total value of a PPI policy is about 20-25 percent of the value of the loan, although this can reach as high as 70% in some cases. Considering a 10,000 pounds loan in this case, it means paying between 2,000 and 7,000 pounds extra for the payment protection insurance. In the event that the loan is repaid early the lender is under no obligation to cancel the now redundant PPI, leaving you with high monthly payments on a product which you in essence can not claim on or make use of in any way.
Happily this product has not been retailed on large scale since 2009 but unfortunately millions of these policies were sold to unsuspecting victims over the years before the FSA took its decisive action. There is a solution though as mis-sold PPI is actionable through the right channels.
