Could mis-sold PPI become the worst ever personal finance scandal to hit Britain? The current level of complaints and the FSA’s expectations of future complaints, certainly suggest so.

The personal pension mis-selling and endowment mis-selling of the 1990s are currently regarded as the worst personal finance scandals in British history. At the rate complaints about mis-sold PPI are being made, mis-sold PPI could soon surpass personal pension mis-selling and endowment mis-selling to become Britain’s worst personal finance scandal ever. Mis-selling of these products saw the reputations of the providers suffer. Commission driven salesman who mis-sold personal pensions had a hand in damaging the reputations of providers such as Prudential, Abbey Life and Royal & SunAlliance. Prudential was fined £650,000 for these failings while Royal & SunAlliance were fined more than £1.35 million for failing to identify and compensate 13,500 victims.

For endowment mis-selling, Allied Dunbar received the nickname “Allied Crowbar” for the strong-armed sales techniques it used to get borrowers to take out the policies.

Could the reputations of companies who have mis-sold PPI see their reputations damaged in a similar way?

Figures released last month, show the Lloyds Banking Group received 41,874 complaints between January and June this year, just about its insurance products. The majority of the complaints were about payment protection insurance. 36,121 of the complaints were about insurance products sold by the HBOS division of the Lloyds Banking Group, which includes the Halifax, Bank of Scotland and Intelligent Finance brands. 68 per cent of the complaints about HBOS insurance were upheld, suggesting serious problems with the company’s products.

The Lloyds Banking Group has now of course stopped selling payment protection insurance. The decision being put down to increased regulation surrounding the sale of the product.

Increased regulation surround the sale of PPI includes how firms are obliged to deal with customers making complaints about the insurance. Many banks and providers of PPI have been accused of automatically rejecting customers complaints about mis-sold PPI. A record number of customers have complained to their banks about mis-sold PPI this year, between January and June this year, almost 30,000 of these cases were taken to the Financial Ombudsman Service (FOS). The words ‘worst personal finance scandal ever’ ring true further, when 30,000 complaints to the FOS is put into perspective, 30,000 complaints is three times more than the combined totals for mortgages, investments and pensions.

Among the larger providers of PPI, Barclays was the biggest loser when it came to customers complaining to the FOS. Barclays had a staggering 61 per cent of their complaints about mis-sold PPI upheld in favour of the customer. However Barclays were not the worst culprit, some smaller providers were found to be in the wrong almost all of the time.  All complaints against Eisis, 99 per cent of those against Ocean Finance and 90 per cent of those against Black Horse were settled in favour of the public.

In total 81 per cent of the cases taken to the FOS about mis-sold PPI were upheld in favour of the customer between January and June this year.

Mis-sold PPI certainly looks like it will be the worst personal finance scandal ever.

A report published earlier in the month by consumer money comparison website, Moneynet has shown PPI is in danger of no longer being considered by customers obtaining finance.

PPI has gained a bad reputation due to findings by the Financial Services Authority (FSA) that a large number of policies had been mis-sold. Due to PPI’s bad reputation, many customers are now apprehensive about purchasing the insurance.

With talk of lenders being prohibited from selling PPI at the point of sale, there is a danger that many customers won’t even consider this insurance and will end up without suitable protection for their debts.

Despite having gained a bad reputation, PPI is still an ideal safety net for those who need it. A PPI policy will cover a borrower’s monthly payments if they are made unemployed or are unable to work due to being made redundant, falling ill or having an accident. If a customer has no other insurance cover in place to protect their debts, PPI is still an ideal product to consider.

After some of the freezes and cuts announced in this week’s emergency budget, the country’s finances are still only in the early stages of recovery and unfortunately the prospect of redundancies still loom. Due to this it is vital customers protect their debts, if not by using PPI but by using one of the many other insurance cover options available

PPI stands for Payment Protection Insurance. PPI is usually taken out alongside mortgages, personal loans, credit cards, or when obtaining finance for high value products.

PPI is an insurance policy designed to cover monthly payments should you be unable to work because you fall ill, suffer an accident or because you have been made redundant.

Research by the Financial Services Authority (FSA) however has found many cases of mis-sold PPI policies. Cases include PPI being added to finance without the customer being made aware.  In other cases, it has been implied that PPI is compulsory and that taking out a policy would improve a customer’s chances of getting finance.

Of the worst cases found by the FSA, were those where a customer had been sold a PPI policy, which they would never be eligible to claim on.  Ineligibility to claim could be due to the customer being unemployed, retired or self-employed at the time of the policy being taken out or having a medical condition or existing illness that could stop them from working in the future.

Some policies have upper age limits, usually 65 or 70; the FSA found cases where the terms of these policies were not met and were sold to people above these age limits, leaving them ineligible to claim.

Payment Protection Insurance cannot simply be written off as a bad product, for those who need it PPI is an ideal product. Designed to cover loan, credit card or other finance payments in case of accident, sickness or unemployment, there is nothing wrong with PPI for those who have no other insurance measures in place.

Customers should still see protecting their debts as a priority, however they shouldn’t settle for the PPI policy on sale when obtaining finance, instead they should remember they are free to shop around for the best value product.