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Any consumer who has any type of formal debt or credit such as a credit card, mortgage loan, car finance or any other credit can take out this insurance cover to protect them just in case anything was to happen to them.
Basically, PPI works in a simple manner. A customer of a bank or other financial institution will take out a loan, mortgage or other credit facility and then take out an insurance product such as PPI in order to be protected in case they are at one time or other unable to repay this loan. Should a policy holder of this policy fall sick, lose their job or become incapacitated in any way and are not able to meet their debt repayments and obligations, the insurance will make these payments on their behalf. This means that the loans will get repaid on their behalf. This repayment will proceed for as long as the person is sick or unable to meet their repayments requirements. PPI will actually repay the loan, but only the minimum amount necessary per month, for a period of up to 1 year or until the consumer and policy holder recovers or gets another job.
Ideally, insurance firms should be selling this insurance product to consumers within the UK. However, most financial services firms such as banks and other lenders usually process PPI applications from consumers. In fact, bank staff usually sells this insurance product to their customers. It is here where things did go wrong for the banks as this selling led to the mis-selling from where PPI claims hail from.
Basically, banks were reportedly mis-selling PPI claims to their consumers for a long time. They used wrong methods of selling and did not provide correct information to their customers, sold the insurance using wrong information and even mi-informed or used important information that customers had the right to know. This led to a case being filed in court against banks on behalf of the customers. Apparently, the courts ruled that the banks used wrong information and did not adhere to the law. They were found guilty and order to pay claims to all customers who will properly demonstrate they were victims of this mis-selling.
In order to file for a claim, a consumer or affected UK borrower and holder of a PPI cover will have to apply to the UK Financial Services Ombudsman. The Financial Ombudsman has the power, capacity and mandate to oversee the entire claims process. A valid application that gets to his office will be validated and will be sent to the banks for repayment. There is a procedure in place regarding how a claim should be filed. This information is in the public domain though not most UK consumers are aware of it. Many customers are not even aware they were mis-sold PPI insurance.
There are firms that were set up by private individuals with the sole aim of helping innocent consumers make good the court ruling and file for compensation that is due to them. Many customers are unaware of these rulings. Many more are not even aware that they were wrongly or illegitimately sold insurance by the banks. They may need to consult these firms and find out about filing for a claim.
To file a claim is free and no one is required to pay any money. Those who choose to use the services of a Financial Services Ombudsman will in return be required to pay certain fee which they sign up to in order to receive their services. Here, they will be guided on how to write an application letter and how to fill in the forms. They will also be shown and assisted with filing the necessary paperwork include documentation and all the necessary requirements.
Upon receipt of these application, the Financial Ombudsman will peruse them and if found to be in order, send them to the banks for payment. Almost 95% of all applications have been successful so far, with consumers receiving about £3,000 in compensation on average.