PPI is a great concept. It is a form insurance which offers protection against client becoming unable to repay the loan due to an injury, accident, sudden unemployment. However, banks and other lenders misused this concept which led to one of the biggest financial scandals of our time. This scandal put a question mark on the validity and effectiveness of the concept. What was the purpose of designing payment protection insurance? It was designed to protect borrowers from unexpected events and becoming unable to pay the loan. Hence, it would be very appropriate to say that PPI was designed purely for the benefit of borrowers.
Meanwhile, there are some guidelines that banks and lenders must follow while selling PPI. In case, they did not follow those guidelines and mis-sell policy, the borrowers are legally entitled to claim back their money. You must understand that there is nothing wrong with PPI; however, the issue arises when PPI is mis-sold to someone who really does not need it. Speaking of the major financial scandal of our time known as PPI scandal, many banks and other lenders abused PPI system during the last decade. They mis-sold PPI using wrong practices such as not informing borrowers about all the important aspects of policy.
While selling payment protection insurance, it is a legal binding on lenders to inform their borrowers about and each and every aspect of the insurance policy. It is basic right of every borrower to know everything and fully understand about what they are purchasing. Most cases revealed that lenders told their borrowers that the policy was mandatory or compulsory to be able to get approve loans which is completely wrong. As a matter of fact, this policy is not mandatory but optional and it does play any role in improving borrowers credit rating to get approved loans.