...Among the worst mis-selling practices related to ‘single premium PPI’, which had been banned by the FSA in May 2009. This is where the policy was effectively payable by a lump sum payment, being added to the financial loan as a ‘one-off’ premium at inception.
Lenders and brokers often recommended single premium PPI without taking reasonable steps to ascertain whether this was appropriate for the customer. In fact, single premium PPI was a particularly bad deal for the consumer for a variety of reasons.
Firstly, it was frequently automatically included in the overall loan quotation. Sometimes, this led to the situation where the customer was completely unaware of the existence of the insurance policy. Customers should have been informed about the policy from the outset and had the cost of the policy told to them separately to the overall price of the loan.
Secondly, the item was poor value. Less expensive PPI was usually available elsewhere, but customers were rarely informed of this. In fact, they were regularly given the impression that the product was compulsory, whereas, in reality, it was optional.
Thirdly, customers would frequently not be entitled to a pro-rata refund in the event that the loan was repaid early. Put simply, the customer may have paid for payment protection throughout the term at the start. However, if they re-financed at some stage throughout the term, they might not have been entitled to any rebate of the PPI for that remaining period.
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