Payment protection insurance or PPI used to be sold to consumers who were obtaining a loan from a bank or other lending institutions. This was very popular in countries like the United Kingdom. However, some of these consumers were not informed or were mis-informed regarding the deductions pertaining to PPI.
Background of PPI
It became the wrong practice in the UK when the cost of the PPI was started to be included in the loan amortizations without the knowledge of the borrower – so it resulted in debtor paying more. Some borrowers were informed but were compelled to purchase the PPI because they were made to believe that the insurance is a loan requirement. Thus, in order to be granted a loan, they had to buy this PPI. This is the background why many PPIs were mis-sold PPI. And borrowers who were granted with a loan under this scenario are eligible to make a claim for PPI compensation.
Two ways of claiming PPI compensation
- The affected borrower can file his or her claim for PPI refund on their own.
- The affected borrower can hire his or her representative, i.e. a claims management company, which can work for the refund or compensation. In some cases, a solicitor is hired instead of the management company.
Choosing between the two ways
- Refund claim by the borrower– The only advantage of this method is the borrower does not need to bear any expense on agent’s fee. The drawbacks are longer time to receive the refund and the possibility of lesser amount of refund.
- Refund through a claims management agent or solicitor – The legal amount will be received and the length of time to get the benefit is shorter. The drawback is that the amount will be reduced by 25% because the applicant has to pay for the representative’s commission.
There have been many cases in the past when the net benefit after the 25% commission still remains higher than what a claimant gets by filing for a claim on his own. This is because you are not aware on how much was the actual amount collected from you, especially when you belong to the group who were not informed. The bank can pay you minimal amount. But with a claims management company, you are paid the real amount because your agent can demand so. He knows how much the lending institution owes.