Mis-sold Life Insurance - Do I have a case?

tdobie21

Hello

I was recently going through some old papers and came across details of a policy I believe was mis-sold to me way back in 1994. I was in my early twenties at the time and had borrowed £10K from my bank to buy a share in a house with some friends. The policy was with Midland Life Ltd. The manager of my local Midland branch who arranged the loan (now HSBC) told me that the life policy was mandatory due to the amount I was borrowing and my ability to pay it back - I was barely out of college at the time. However, looking back over all of the paperwork (which I still have), my father acted as guarantor on the loan, meaning that if I ever defaulted, he would have been liable for the entire debt. I'm no financial expert, but I'm sure this means there was technically no need for me to have taken out out the policy in the first place, given the legal implications of my father's role. The policy ran for 3 years while I repaid the loan.

I appreciate this was a long time ago, but I have heard of banks making settlements dating back as far as this. So my question is - do I have a case in reclaiming the payments for this mis-sold policy and if so, what is the likelihood of the bank looking into a possible complaint. As I say, I have copies of all the original paperwork, which have no doubt long since been destroyed by the bank.

Many thanks in advance for any advice or help.

dunstonh

The policy was with Midland Life Ltd. The manager of my local Midland branch who arranged the loan (now HSBC) told me that the life policy was mandatory due to the amount I was borrowing and my ability to pay it back

Quite common in the 80s and 90s. Tends to only be a requirement in the commercial sector nowadays though.

However, looking back over all of the paperwork (which I still have), my father acted as guarantor on the loan, meaning that if I ever defaulted, he would have been liable for the entire debt.

That verifies you also had a financial need for the life assurance. So, that blows your only potential chance of success out of the water.

I'm no financial expert, but I'm sure this means there was technically no need for me to have taken out out the policy in the first place, given the legal implications of my father's role.

1 - the lender is allowed to insist on life assurance when lending money
2 - you had a financial need (this is measured by the question: Is there anybody who would be financially worse off in the event of your death? - in your case, your father would have been. Hence you had a financial need).

do I have a case in reclaiming the payments for this mis-sold policy and if so, what is the likelihood of the bank looking into a possible complaint.

Nothing you have said indicates any wrongdoing.

tdobie21

Many thanks for your response.

Just to be clear - are you suggesting that if my father had not acted as a guarantor, I might have had a chance (however slim) of legitimately claiming the policy was mis-sold to me?

Secondly, despite the fact that it was 'quite common in the 80s and 90s' for banks to sell life policies to customers borrowing money, does this still mean the policy was fit for purpose? At the time I was single with no dependents, I understand this factor may weigh in my favour. The policy was a Midland Mortgage Protection Plan (single life).

haras_nosirrah

I agree that you had a need.

Had there been no guarantor then the debt died with you so no need for life cover

The fact that if you had died your father would have been liable for all the payments means that he would be financially affected by your death as he would have had to make all the payments you couldn't make

Life cover therefore protected him and there was a financial need

dunstonh

Just to be clear - are you suggesting that if my father had not acted as a guarantor, I might have had a chance (however slim) of legitimately claiming the policy was mis-sold to me?

If your father was not guarantor and you had no wife/partner and/or children then you would not have had a financial need. That would be a mis-sale unless the lender insisted on the policy as a condition of borrowing.

econdly, despite the fact that it was 'quite common in the 80s and 90s' for banks to sell life policies to customers borrowing money, does this still mean the policy was fit for purpose?

Life assurance is a very straightforward product. It pays out if you die. So, it would have been fit for purpose. Banks are allowed to insist on insurance as a condition of borrowing. Do not mistake PPI for life assurance. With PPI, many of the bank staff lied about it being mandatory. It never was (apart from some mortgage deals in the 90s to very early 2000s)

At the time I was single with no dependents, I understand this factor may weigh in my favour. The policy was a Midland Mortgage Protection Plan (single life).

It wont weigh in your favour for two reasons. 1) you had a financial need for it and 2) the lender insisted on it.

haras_nosirrah

Have also twigged it was a mortgage protection plan and the money was used to buy into a house with some friends I.e I am guessing a joint mortgage

tdobie21

Thanks for your replies dunstonh & haras.

Just to clarify, there was no mortgage policy and there certainly wasn't a joint mortgage held with my co-owners. It wasn't a loan secured against the property. It was a personal loan, which I used to buy into a share of a property. The bank obviously knew the reason I was borrowing the money on application, but there is no mention of the property or in fact, any reference to what the money was to be used for in any of the documentation, yet I was sold a mortgage payment protection plan.

dunstonh

yet I was sold a mortgage payment protection plan.

Which would be correct for a loan That may be the marketing name but generically, the policy would be a decreasing term assurance and they are suitable for loans. You can also use them in estate planning and that can look very weird if the provider calls it a mortgage protection plan but its nothing to do with mortgages.