Is there a law which states PPI is not compulsory

Butterscotch

Hi

I am in the process of taking my bank to court as they missold me PPI (the court has cashed my cheque now and I am getting all my documents together for my day in court!).

I wanted to know where abouts in English law it states that payment protection insurance is not compulsory and I should be given the opportunity by my bank to shop around for a cheaper policy.

Is there anything mentioned in the Consumer Credit Act to say it is not compulsory?

Could anyone help please?

Thanks

bryanb

Parliament would not pass a law to say you don't have to do something.

~Brock~

It is perfectly legal for a lender to insist on the purchase of a PPI (or any other type of) insurance policy in order for a loan to be granted. However if this is the case then the cost of such a policy must be included as part of the APR calculation because it should be regarded as part of the cost of credit.

This would obviously make the APR % a lot higher than it would be without it and therefore, for competition reasons, PPI was always regarded as optional.

Credit agreements changed towards the end of the 1980's to include the word 'Optional' before any description of insurance products that were also funded by the loan, and this still hold true today. When the policy is optional there is no need to factor the cost into the APR calculation.

Under FSA rules, and contrary to what a lot of people seem to think, there is no requirement for a lender to advise you about the existence of other policies, providing they have made their status clear at the beginning of any disussions that they are only able to talk about a limited range of products (i.e their own).

There are a few cases going through the courts at the moment surrounding PPI sales, but I fail to see any gounds for legal redress, based on current law, where the policy has been correctly sold in the first place.

never-in-doubt

~Brock~ wrote: »

There are a few cases going through the courts at the moment surrounding PPI sales, but I fail to see any gounds for legal redress, based on current law, where the policy has been correctly sold in the first place.

But surely the lender cannot force someone to take an insurance policy just for having the loan.... this would surely be clear mis-selling, i.e. if I am self employed and they wanted to lend me money then why should I have to pay for an unemployment policy that would, in essence, be void from outset?

This guidance does need clarifying really

(Brock I am asking a question, thus used 'surely'... cheers mate)

~Brock~

never-in-doubt wrote: »

But surely the lender cannot force someone to take an insurance policy just for having the loan.... this would surely be clear mis-selling, i.e. if I am self employed and they wanted to lend me money then why should I have to pay for an unemployment policy that would, in essence, be void from outset?

This guidance does need clarifying really

(Brock I am asking a question, thus used 'surely'... cheers mate)

If it's the lender's own money they are lending out, they can insist on whatever they like, just like you could if it was your money!. The alternative is not to lend it in the first place.

Even the FSA acknowledge that PPI may sometimes not be optional

"PPI is almost always optional – you should not normally be refused a loan if you decide not to buy it. If in doubt, ask your provider whether it is optional."

The implication is clear, although almost always optional, it may not be!
The only caveat is that they make it clear in their terms, and not mislead over the APR. In reality this never happens in practice, but I felt it important to make the point in the context of the original post.

Edit: the self employed bit I agree with, but even self employed can claim under the accident/sickness part of the cover. If the lender insists on it then the consumer still has the choice not to take the loan out at all.

Butterscotch

Thanks for everyone's input.

shafted_fpc

in answer to OP
it is a bit grey but, a shade that is in your favbour as above it is counted as a cost of credit if sold as compulsary, no doubt you would have other reasons for mis selling however the movement in on the issue is that it has something unfair about it, therefore can be looked at re UTCCR and more importantly section 140 of the consumer credit act. "unfair credit relationships" however you may be better placed just to go through a standerd template and reclaim that way.