PPI should have helped you repay your loans, mortgages and credit cards, but it turns out it won’t function very well for you because your banks used tactics to have you purchase something extra that goes into their profit. Bank mis selling is key to avoiding future incidents of getting mis sold financial products you don’t need. Here’s how banks made the PPI scandal very possible.

1. “We Recommend This to All Our Customers”
This particular strategy is well-known from UK big bank Lloyds Banking Group. Lloyds is essentially the biggest PPI mis seller with over £5.3 billion in repayments. Former Lloyds employees say the bank trained them to tell customers that PPI was essential for their loan and that they “recommend it to all their customers”. PPI has its exceptions, so it cannot be a recommendation for anybody.

2. “This is a Loan Requirement”
Some bank representatives tell customers that the PPI is a loan requirement; they cannot have the bank approve the loan application without lowering its risk value. The notion that PPI lowers risk value is not true because PPI has its exceptions and your credit score is where your bank should only consider your risk value.

3. “It’s a Packaged Deal”
Bank employees would sometimes tell you that the PPI comes with the loan, mortgage and credit card free for one year. This is actually true and you get to repay the insurance the following year. However, you are still mis sold PPI and you are paying for something you cannot make use of.

In case you intend to make a PPI claim, it is essential that you know how to make a PPI template letter and where to submit your claim. You could also ask a PPI claims company to help you sort things out.

Financial Ombudsman Chief Natalie Ceeney says that why claims management companies receive at least 50% of the PPI claims compensation package is because banks were not doing their job properly. The Financial Services Authority early this year had tasked banks to call on customers who are potentially mis sold PPI. These includes employees who are protected by employers with sickness repayment funds, not just those ineligible for the insurance policy. However, banks did not perform their job well, having them play into the hands of claims management companies like PPICo.co.uk.

Even if CMCs are subject to public scrutiny, many consumers who were contacted by the companies evaluate if they do have mis sold PPI. About 7 out of 10 cases of mis sold PPI submitted by CMCs to the FOS are claims where the bank’s decision was not satisfactory for the customer. Most people working with CMCs are those who are working or have no time to make a claim, or supposedly those with multiple PPIs sold on loans and mortgages.  The FOS boss sees that CMCs actually help by “alerting all customers” while she discourages “cold” calls and text messages.

Natalie Ceeney states that banks are still “dragging their feet” to address the situation, which prompted the customer-bank relations organization to boost their manpower to 3,000 and expanding their work spaces at Canary Wharf. The FOS has also proposed a no-claim payout to allow customers to receive compensation automatically without having to make a claim.

Confederation of British Industry director general John Cridland called for a deadline for making PPI claims, believing that the scandal can get more expensive and time consuming. However, the proposal is still in debate given that banks have not written to customers who they believe have been mis sold PPI and that the volume of PPI mis sold is estimated by experts to be around 34 million for the entire United Kingdom.

The Financial Ombudsman Service (FOS) recently stated that they potentially receive 1,500 PPI claims per day from millions of UK customers who were mis sold PPI. While this was a 129% increase from the amount of PPI mis sold last year, the FOS and certain industry analysts saw no signs of slowing down. They mentioned that the end of PPI claims is still quite far away.

From January to June 2012, 2.2 million claims were processed by the FOS. According to the consumer group Which?, PPI mis selling is the biggest financial scandal in the United Kingdom’s history. They also warned banks and financial institutions to set aside more compensation money as their reserves might run out by the end of the year.

Barclays recently set aside £2 billion for compensation claims. Lloyds had reserved £4.3 billion and last Monday had guaranteed £700 billion for PPI compensation claims. Other banks have an average spending of £1.3 to £1.5 billion in PPI spending. The total cost of the PPI compensation package has reached £10 billion this year alone and has the potential to reach £13 billion by the end of the year.

Analysts state that even if the FOS has reached their 500,000th claim, it is still a small number compared to the population of mis sold in the United Kingdom. Industry analysts state that at the PPI crisis might definitely end by the year 2016 should the personnel in the FOS increase, new PPI claims processes become easier and faster and banks become more cooperative and avoid delaying their customers.