Editor’s note: This post was written in collaboration with EMCAS: they kindly provided the data but the analysis and sentiments are mine. For more information about how EMCAS can help you to make a claim for financial mis-selling please visit: www.missing-millions.co.uk
I still remember the day I got my first credit card. Yes, I do realise that most of you, my readers, got offered your first credit card fresh out of high school but this is not how it worked with me. When I applied for my first credit card I had been in the UK for couple of years and had just started working. My idea was that having a credit card will help me cushion the expenses when travelling for work; my bank manager’s idea was that I’ll immediately go to the nearest shopping mall (as if) and spend all I can on stuff. So, incredible as this may sound to the ones who got credit cards thrown at them, I was refused!
After making a bit of noise about the whole thing the bank consented – I had my Visa card with £500 ($755) limit. Having paid the balance off for some time, the limit was gradually increased and one day I got a call asking me whether I would like to buy payment protection insurance (PPI).
‘What is this? What does it mean?’ – I asked.
‘Well, this will ensure that if you lose your job you can continue making the payments.’ – came the answer.
‘I don’t intend to lose my job’ – I answered and put down the phone.
Little did I know at the time that I had just avoided being mis-sold a PPI policy! Today this practice is one of the biggest scandals facing the financial services industry, costing it billions of pounds in compensation. In fact, according to a survey commissioned by EMCAS the financial services industry owes British consumers about £18.3 billion for mis-sold PPI policies.
According to the Competition Commission, altogether over 28 million PPI policies were sold in the UK; the Financial Services Authority (FSA) estimates that 40% of those were mis-sold. This amounts to over 11 million mis-sold PPI policies!
While 4.6 million claims for compensation have already been made and met by the banks, there are still nearly 7 million mis-sold PPI policies for which claims for compensation have not been made yet.
One question I find intriguing is why so many people have not claimed yet. The results of a survey commissioned by EMCAS, a claims management company, provide a partial answer. This web-based survey was carried out in March 2013 and covered a sample of 2,064 people in the UK. It found that:
- Close to a quarter of the UK adults (22%) are either not sure whether they could claim compensation (5.5%) or whether they have been mis-sold or not (16.5%);
- A quarter of the adult population in the UK feel that they don’t have enough knowledge to make a claim on their own; and
- A sizable proportion of the surveyed sample (22%) claim they don’t have enough time to make a claim.
We happen to be one of the households in the UK who didn’t fall for the PPI scam (though as you know we committed many other PF sins); also, we had endowment mortgage policies (another unfortunate financial instrument sold by the banks) but we soon realised these are not worth it and cashed them in. However, I believe that anyone affected by this scandalous practice should claim because you have been:
- Sold a policy taking advantage of your uncertainty regarding the future and innate need for security;
- Severely overcharged in the case of PPIs;
- Led to believe that the endowment policy you took out will cover your mortgage when even a slight underperformance of the stock market would create a shortfall. This is what happened to many people in the early 2000s.
Last but not least, this is unethical behaviour on the side of the financial services industry. Call me old fashioned, but I do believe that breaking ethical norms should be sanctioned – failing to do this robs both side of the opportunity to correct their behaviour in the future.
Could you be amongst the 7 million people in the UK who have been mis-sold a PPI policy and haven’t claimed their compensation yet? Please check and act appropriately!