Payment Protection History
For many years payment protection was a widely sold cover and trusted form of financial protection. Sold alongside mortgages, loans, hire purchase agreements, store and credit cards it was designed to cover the borrower in the event they became involuntarily unemployed and couldn’t keep up with debt repayments. The payment protection market was worth £5.5 billion annually and there were thought to be more than twenty million active policies in the UK. Public opinion regarding payment protection cover began to sour; however, in 1998 when consumer action groups began criticising the value offered by the cover and lobbying for an investigation into the way in which it was being sold.
In 2005 The Financial Service Authority (FSA) was appointed to regulate general insurance and announced it would make a review of the PPI market a priority. This was a significant point in payment protection history as the FSA has proven vital in addressing the issue of mis-sale.
In 2005 the FSA released its first report into payment protection. The report was based on a series of mystery shopping exercises as well as visits to sellers. The report identified some significant failures. From 2006 to 2008 the FSA continued its PPI investigations. It fined a number of firms it found guilty of significant failures as well as introducing comparison tables for PPI customers and banning single-premium policies.
With the number of people registering claims for mis-selling constantly growing, in 2009 the FSA produced a paper giving information on how lenders could improve complaints handling techniques. This was followed in 2010 by a new set of guidelines on PPI. The guidelines included a stipulation that lenders should actively trawl their own records to look for cases of mis-selling. The British Banking Association (BBA) was particularly unhappy with this rule and requested a Judicial Review of the matter.
In April 2011 the High Court found in favour of the FSA, dismissing the BBA’s claims. This was seen as a valuable victory for consumers and a pivotal moment in payment protection history.