Payment Protection Insurance or PPI has become one of UK’s most controversial financial issues in the past decades. Many banks are facing multimillion pound penalties because of the millions of PPI complaints that have erupted since 2007. There are as many as 3 million PPI policyholders in the UK, with hundreds of thousands of people with lodged complaints at the Financial Ombudsman Services.

The main reason why millions of people were mis-sold PPI is due in large part to the bank representatives and the lack of information of people about the details of personal finance. When people took out loans, the banks included in the loan agreement form another financial product that is the PPI. PPI is designed to help people pay for their loans in case they lose their jobs involuntarily or get sick. It turned out that many people were not aware of the PPI being another separate financial product from the loans they took out.

According to the Consumer Protection Code, two financial products such as loans and insurance, in this case the personal loans people took out from banks and the PPI that the banks sold to them, must be quoted separately from each other and explained clearly.

This provision in the Code was violated because most PPIs were riders to the contracts that is supposedly for the loans alone. Banks never bothered to clarify with their clients that the PPI was a completely different set of financial product that they did not need to avail to have the loan.

Apparently, banks and their agents misled millions of people to believe that PPI was a requirement for the loans they were taking out. In other cases, banks did not clarify that PPI was optional, and that they could get this same product from other financial institutions.

Typically, before financial institutions sell any type of insurance, they first need to make a background check at the very least on the person they are selling the product to. This standard procedure was mostly absent in the selling of the PPI, which is why so many people filed complaints because they have NO NEED for such product.

You can get a template letter for a PPI refund from any claims website, and you can address this to your bank. If they do not oblige, proceed to the Financial Ombudsman Service, the government agency that takes care of personal financial disputes. Remember to present all necessary documents and supporting evidence to back your refund claim. Medical certificates, for example are good if you took out the PPI with pre-existing medical conditions. If this all sounds daunting or you don’t want to spend time and energy fighting the banks for a refund, then you can always enlist the services of a professional claims management company.