PPI Claims vs Car Finance Claims: What’s the Difference?

Payment Protection Insurance (PPI) and car finance claims are secondary products of financial services that financial firms offer. PPI claims are meant for complaints related to consumer’s naivety of the policy or being pressured to take out the policy upon credit card application. In dealing with car finance claims on the other hand, they are meant for undisclosed commissions and unfair car finance agreements. Both of them have been mis-sold to consumers. For this fact, the Financial Ombudsman Service has received many objections from the two. 

Understanding PPI Claims

Payment Protection Insurance, or PPI, was created to safeguard consumers. It is designed to insure a consumer’s loan or credit repayments in events of failure to work due to illness, accident, unemployment, and any other related manner as long as the agreement expresses. While it may seem like a good investment, it has been one of the causes of issues FOS have been handling. This financial product is often mis-sold alongside other financial instruments like loans, mortgages, and credit cards. 

Touching its history, PPI mis-selling has been evident in the UK since the 1990s. Financial institutions often exercise misleading and aggressive practices to sell PPI products with their selfish motive of boosting their profits. According to FOS, the following are the common complaints they deal with about mis-sold PPIs. 

• Consumers opposed the PPI, yet dealers sold it to them. 
• Consumers don’t actually want PPI, yet dealers conceal sales to consumers as part of the financial product they intend to avail. 
• Consumers are compelled to acquire PPI because they are swayed to believe that their loans, credit cards, mortgages, and other financial transactions will not be accepted without it. 
• The PPI was inadequately discussed, and it was later ruled that it was not suitable for the consumer. Some PPIs do not apply to consumers with pre-existing medical conditions, self-employed, or those working in the military, professional sports, prison, etc.
  

Consumers are entitled to PPI claims if they believe that the commission they are reimbursing is equivalent to half of the total PPI package and the creditor did not clear this with the consumer, this is in accordance with the FOS. 

This is applicable if the: 

• consumer took out the credit that was sold with PPI on or after April 6, 2007;
• consumer took out a credit that was sold with PPI before April 6, 2007, and was still running on or after April 6, 2008.

The compensation issue on PPI claims has made millions of people in the UK realise that they were sold PPI policies that they don’t even need, could not use, or did not even know they had in the first place. This is a clear manifestation of how unrestrained mis-selling of financial products in the UK.

The whole unfortunate compensation dilemma on PPI claims has made millions of people in the UK realise that they were sold PPI polices that they don’t even need and can’t be leveraged. There are also cases where consumers are unaware that they had one in the first place. This says a lot about how unrestrained mis-selling of financial products in the UK. 

Understanding Car Finance Claims

Car finance is a means to provide consumers accessible means in buying their car. Consumers can make transactions for their car through Hire Purchase (HP) or Personal Contract Purchase (PCP) to diversify the cost of the vehicle and lessen their financial burden. However, the car finance industry has reported considerable events of mis-selling of car finance agreements, which is mostly anchored from unstated commissions. 

 It is imperative for the dealer to exercise absolute transparency about all the terms included in the agreement when a consumer is taking a loan through a car finance. The terms should also state the amount of commission the dealer will receive from the agreement. The issue lies in the commissions not declared outright, leaving the consumers clueless about the true cost of the finance agreement. 

Without transparency in the commission fees, the finances of the consumers are significantly affected. Most of the unfortunate consumers end up reimbursing significantly more than what they are intended to pay for the vehicle that they purchase. Below are some of the ways in which car finance agreements are missold by dealers. 

• The broker or dealer did not disclose that they would receive a commission from the car finance agreement.
• The broker informed the consumer about the commission but did not disclose the potential amount of the commission.
• The commission is excessively high compared to industry standards, unfairly increasing the cost of car finance for the benefit of the broker and the firm.
  

Consumers are entitled to car finance claims if they took out car finance between 2007 and 2021. Within this period, brokers widely exercise the discretionary commission agreement (DCA), which was barred by the Financial Conduct Authority in 2021. 

Key Differences: PPI vs. Car Finance Claims

PPI claims and car finance claims both stemmed from mis-selling practices of the financial firms. Here are some distinctions between these two financial products.

• Product type

PPI is an insurance policy, while car finance is a loan agreement. 

PPI renders financial protection to consumers in case circumstances happen and they are unable to settle their monthly dues for their loans, which includes their car finance agreement. In contrast, car finance is a method of financing a purchase to spread the cost of the vehicle. The latter allows consumers to not pay the full amount of the vehicle upon ownership. 

• Grounds for Claim

Most PPI claims exist due to mis-selling acts during the insurance sale. Such practices are pressure selling, lack of transparency, and unsuitable policies. Car finance claims are often because of hidden commissions or exaggerated commissions as part of the car finance agreement signed by consumers. Yet, the mis-selling practices of the brokers can also be used as grounds for car finance claims. 

• Claim Process

In handling PPC claims, consumers usually deal with banks or lenders who sold them the PPI. For processing car finance claims, consumers are needed to deal with their finance companies or dealerships that facilitate the finance. 

• Compensation

In PPI claims, compensation is usually based on the amount of premiums paid plus the interest, while in car finance claims, it is usually based on the amount of undisclosed commissions received by the brokers. In other cases, though, other forms of compensation might also be awarded to car finance claimants, depending on the cases of the consumers.

Dispelling the Myths

Misconceptions in relation to PPI claims and car finance claims exist. It is critical that truth rises about them. 

• I did not have PPI

Because the dealers do not provide clarifications to the customers about selling PPI policies, typically, consumers assume that they do not have PPI policies. Consumers are urged to review their past loan agreements or contact their lender to rule if they had PPI. There are also accessible online resources to rule if they have PPI and if they are entitled to PPI claims. 

• My car finance agreement was from years ago

Irrelevant to how long the consumer thinks their car finance agreement has been running, if it is within the time period as set by the Financial Conduct Authority, then they may be able to claim on their car finance. Consumers can always seek guidance from a legal professional or review the Financial Ombudsman Service to check applicable time limits. .

• I need paperwork to make a claim

Having the complete documents makes the claim process easier and faster. However, if consumers do not have the copy of their agreement, they can still request for a copy from their lenders, especially for the PPIs. The lenders and finance companies have the duty to provide these documents if ever consumers request for one.

• Claiming is complicated and expensive

The claim process can be overbearing, but help is always within reach. The Financial Ombudsman Service can render free guidance along with support for consumers who believe that they are entitled to compensation but are clueless about how to start the process. 

The PPI Claims Process: Step-by-Step

Here are the basic steps to file for PPI claims.

• Gather documents/information

Consumers must prepare the copy of the PPI policy agreement. If they do not have the documents at all, they can request a copy from their lender.

• Contact the financial firm

Giving adequate notice to finance firms about the complaints is critical for consumers. They have to explain to their financial firm why they think they were mis-sold and how they would like the dilemma resolved.  

• Wait for the response of the financial firm

The financial firms are required to respond to consumers within eight weeks. They should provide the outline of their decision and their proposed resolution.

• Escalate the complaint to the Financial Ombudsman Service

In events where consumers are not satisfied with the reply of the financial companies or there is a neglect on the side of the financial firms to respond within the period, they are free to raise their concern to the FOS. This should be performed following the expiry of six months from the date of the receipt of the response of the financial firm. 

• Wait for the response of FOS

The FOS will check on the consumers’ complaints, and the side of the financial firm as well. While the investigation is being done, additional documents or information might be asked from the consumers, if necessary.

The Car Finance Claims Process: Step-by-Step

Here is a simple guide consumers can use to file for a car finance claims compensation.

• Gather documents/information

Consumers must prepare their car finance agreement and other relevant documents that can be used as evidence for the claim. These documents will provide important information about their card finance agreement, including the terms and condition, the commission charged, and the contact details of the finance company.

• Contact the car finance provider

Consumers need to file their complaint first to their car finance provider. They have to let them know that they are unhappy with the car finance agreement so that their car finance provider can provide resolutions if they can.

• Wait for the response of the car finance provider

The car finance provider should give their response within eight weeks, or up to 45 weeks (if the FCA’s temporary rules apply). If the consumers did not receive a response from them, they can escalate their concern to the FOS.

• Submit complaint to the FOS

The consumer may check the website of the FOS on the process of escalating their concern to the ombudsman. The FOS will guide them on the information needed for their complaint.

• FOS will investigate the complaint

The FOS will assign a case handler that will investigate the complaint. Other documents might be asked from the consumer such as credit agreement, disclosure agreement, and the like.

• Get a fair decision

The FOS will determine if the consumer is treated unfairly. The findings will be explained and how the ombudsman comes up with their conclusion and suggestion for resolution.

Understanding the differences between PPI claims and car finance claims helps consumers to a smooth and seamless compensation claims process. Finally, if consumers believe that they were mis-sold either a PPI or car finance, they have ample options to explore to process their potential compensation.