Am I really owed Payment Protection Insurance (PPI)?

financial ombudsman

I've received a cold call from a company offering to make a PPI claim on my behalf. Are PPI claims firms that cold call me legitimate?

Whilst many cold calls regarding Payment Protection Insurance (PPI) reclaims are legitimate, sadly there is a culture of scams in the industry.

With the average compensation payout in the region of £2,750 it may be tempting to accept an offer of a "guaranteed" PPI payout. But the truth is that even in legitimate cases, using a claims management firm rarely delivers the promised rewards either.

Successfully spotting a scam can prevent us from being defrauded by hundreds of pounds, but using a legitimate claims management firm can also end up being a costly process.

Anyone considering making a claim for PPI needs to be aware of several things.

Read on for the full story or click below to skip to:

The background

PPI is an insurance policy designed to protect borrowers in the event of accident, sickness, unemployment or death. Click here for more on the background to PPI.

It's a genuinely useful and sometimes financially "life saving" product in the cases where it's been sold properly and appropriately. Unfortunately, PPI became the victim of unscrupulous mis-selling because of the high level of profit it generated.

As far back at the late 90s consumer watchdogs voiced concerns about how PPI was being sold, but it wasn't until 2005 when the Financial Services Authority (FSA) initiated a formal investigation into selling practises that the extent of the mis-selling scandal was revealed.

Banks were forced to apologise and agreed to compensate customers who had been mis-sold PPI. Since then billions of pounds of compensation has been paid out, with billions still waiting to be reclaimed.

Keen to draw a line under PPI, towards the end of 2015, the FSA's replacement, the Financial Conduct Authority (FCA) said they were considering bringing in a deadline for claims, which has added a sense of urgency to the process.

Scams: what to look out for

PPI reclaim scams can be hard to spot, especially when we're taken off guard by a confident and seemingly well informed fraudster.

PPI scammers target people who don't have the time or energy to devote to making a claim themselves - but unlike many other scams, this doesn't necessarily involve targeting more vulnerable people, such as the very old or the very young.

In fact the individuals most likely to engage the services of a claims management firm belong to the 25-54 age-group: people typically very busy balancing their work and family lives.

The offer of a quick and hassle-free payout is often too tempting to resist, especially for those who wouldn't have time to do it themselves otherwise.

Whatever age group we belong to, it's best to be sceptical when faced with any company offering to recover money for us.

Be even more cautious if they claim to have done the groundwork already and have the compensation just waiting to be paid out.

If it seems too good to be true - it usually is.

Whilst it is almost impossible to tell the scammers from the legitimate claims firms there certain differences to look out for when cold called by a company offering to win us compensation.

Request for upfront payment

First off, a legitimate PPI reclaims firm will never ask a client to make an upfront payment to process a claim or release funds.

In February 2016, the Ministry of Justice announced plans to ban upfront fees for third party companies all together.

But scammers still use this tactic: they request upfront payments, often between £100 and £400, claiming the funds are needed to cover legal or administrative costs. Once the individual pays out they never hear from the company again.

Scammers also have certain preferences when it comes to how they are paid. They want our money and they want it in the fastest, least traceable, form possible.

Requests for instant payments, such as bank and money transfers, or hard-to-trace electronic payments, such as UKCASH and PaySafe, are all indicators of an attempt to request money anonymously.

Legitimate claims management companies, on the other hand, calculate their fees based on a percentage of the total compensation paid out and deduct it at the end of a claim.

Request to disclose personal information

Never disclose bank account or personal details over the telephone, the internet or in person. If in doubt ask the caller for a direct telephone number and call them back, preferably on a different phone line or after a break of at least five minutes.

This helps prevent them keeping the phone line open and reconnecting to us when we dial out - giving us a better chance of verifying their identity and confirming whether we're really talking to a legitimate company or a scammer.

Scammers are understandably reluctant to be contacted because it makes them traceable. A legitimate company, on the other hand, will be happy to comply with your request - after all they have nothing to hide.

Types of scam

Just like legitimate claims management firms PPI scammers rely on cold calling techniques to entice clients into making a claim.

For those on the lookout for a scam it's worth noting that a cold call is not just confined to contact made by telephone. Cold calling also includes unsolicited contact made by SMS, email, letter, or in person (door to door).

A YouGov survey carried out at the end of 2016 found that nine out of 10 of us receive nuisance calls at least once a month, with 67% receiving unwanted calls about PPI reclaims.

Scammers have taken full advantage of this cold calling culture to defraud people - almost a fifth of people surveyed said they'd been targeted, and more than a third of those people said they'd lost money as a result.

As fraudsters impersonating official bodies run scams over the phone, via tempting text messages, and using door to door sales people, it's likely that the numbers of people being targeted are higher still.

Telephone scams

Fraudsters call impersonating representatives from government organisations, including the Ministry of Justice, or claims handlers from "legitimate" claims management companies.

They tell callers a guaranteed compensation payout is awaiting release, often pending an upfront payment to cover fees. In some cases they'll also request bank details. Once payment is made the company is never heard from again.

Official bodies - whether the Ministry of Justice, FCA, or Citizens Advice, to name but a few - will never contact people to offer PPI reclaims, and a legitimate claims management company cannot make a compensation claim on our behalf without our written consent.

SMS scams

Individuals will receive a text message flashing a compensation figure - usually in the thousands of pounds. By replying "yes" to the message the claim is initiated.

It is illegal for companies to contact individuals in this way without our consent. If we haven't previously opted in to a company's text marketing campaign the chances are the message is a scam.

Be careful, though, as signing up to one organisation's marketing messages can sometimes involve letting them pass those details on to similar companies for similar purposes.

Door to door scams

A fraudster from a bogus claims management company conducts door-to-door visits to assess if an individual is eligible to make a PPI reclaim. Those who are will be contacted later to confirm eligibility - and asked to make an upfront payment to complete their application.

Unlike telephone scammers, doorstep scammers may have obtained written "permission" to process a claim by approaching us in person. Alarm bells should ring when they request upfront payment to continue the claim.

Reporting a scam

Anyone reading this who thinks they may have fallen foul of a PPI scam shouldn't panic.

Contact the local police station or get in touch with Action Fraud on 0300 123 2040 as soon as possible.

Action Fraud are a dedicated fraud and internet crime reporting organisation run by the National Fraud Intelligence Bureau in conjunction with the City of London Police. They work to assist and protect the victims of fraud and internet crime.

When it's legitimate

Not every cold call concerning PPI reclaims will be a scam. Legitimate claims management companies are as likely to cold call potential clients as any other sales company.

They often use the same approach as the scammers, tempting potential customers with promises of large, guaranteed payouts in return for little effort.

However, just because a claims management company is legitimate don't assume they'll be straight in their dealings with us.

Legitimate claims companies have come under fire from consumer watchdogs who have questioned whether their charges and standards of service make them truly fair and honest with customers.

That's led to the crackdown mentioned above: companies are no longer allowed to charge upfront fees, and mustn't charge more than a certain amount overall no matter how big the claim.

Industry figures including the FCA and the Financial Ombudsman Service positively urge people against using claims management companies and Citizens Advice warn of the dangers of responding to cold calls of any kind, legitimate or not.

Despite the warnings, people are still using claims management companies to make PPI reclaims, even though they often take as much work as following up a claim ourselves. The advice for those considering it is to go in with your eyes wide open, and to be aware of just you might be in for.

Excessive charging

It can be satisfying to receive compensation for something not knowingly taken out or mis-sold but beware, those using a claims management company will pay for its services.

With the average pay out running to a few thousand pounds there was a question mark over how much a claims company should take as a fee: the actual process of claiming costs nothing but claims management companies were charging up to 40% of the compensation paid out, plus VAT.

Under the proposals made by the Ministry of Justice, fees should no longer cost more than 25% of the overall amount due, and no more than £300 for any claim worth more than £2,000.

But what does that fee get us exactly?

Having scanned several PPI reclaim websites customers can expect features such as a "high success rate", a "dedicated claims handler", for claims to be made on a "no win no fee" basis and even a "specialist solicitor" should the claim get tricky.

However, once we know the basics of the claims procedure, in the words of the FOS "there is no need to pay a third party to make a complaint."

Making a complaint is free of charge and straightforward, with banks forced to abide by strict regulations and timescales in processing complaints. There is no need for a "dedicated claims handler".

If the bank refuses to pay out we don't need to engage a "specialist solicitor" to fight our corner: pass the complaint to the FOS and they will pursue the claim on our behalf.

In the last six months of 2016 the FOS upheld 51% of PPI complaints initially rejected by the banks in the claimant's favour; they've always found more in favour of the customer than the banks, which we think counts as a "high success rate".

If the FOS do uphold the case in favour of the bank, the whole process will have cost us nothing but our time. So why do claims management companies peddle their expertise on a "no win no fee basis"?

We're just as likely to win PPI compensation by claiming on our own behalf as we would be using a claims management company. The big difference is this - if we win we get to keep 100% of the payout.

But if that's not enough reason to drop the middleman, read on to take a look at their track record for customer service.

Poor claims handling

Along with excessive charging, poor claims handling is the other serious charge levelled at claims management companies by industry watchdogs.

In some cases a reputation for poor service precedes them.

One of the reasons the FCA have suggested a deadline for any future PPI cases to be brought is because of the "significant proportion" of complaints being made by claims companies on the part of customers who have never even had a PPI policy.

There are claims management companies that have calculated fees based on PPI payouts that were never made, leaving claimants without a penny despite a successful claim.

And the Financial Services Compensation Scheme (FSCS) have reported that some of the claims paperwork they receive is often so badly completed they've had to resort to contacting the claimant to clarify the details.

Citizens Advice say that only 5% of people they surveyed said their claims management company had been able to win any compensation for them at all. Many blamed poor customer service and a slow claims handling process.

Can people claim PPI themselves?

There is absolutely nothing stopping an individual reclaiming mis-sold PPI.

It is widely agreed by industry watchdogs, banks and official organisations that making a claim on our own behalf is the best course of action to take if we think you may be entitled to compensation.

Making a claim is free of charge, and the process is exactly the same whether it's us or a claims management company doing it.

Anyone unsure how to go about making a PPI claim can check out our guide, available here - and there are several organisations that can offer advice and guidance on making a claim, including Citizens Advice.

Those who have made a claim only to have it rejected by the bank can contact the Financial Ombudsman Service for advice.

Will my ever bank cold call me about a PPI claim?

At the time of the scandal the banks fought PPI mis-selling accusations, but they've since accepted that they were seriously at fault and duly put aside billions to cover the cost of putting things right. It's currently estimated that the scandal will cost them £40 billion in total.

Following their defeat, a spokesman for the British Banking Association, the body who defended the UK's banks at the time, said:

"The banking industry is committed to regaining the trust of all its customers. Our members are fully aware of the responsibility this places on them to work constructively with customers, providing redress where mistakes have been made."

But will our bank ever contact us about making a PPI claim?

In a word - no.

That said, while they won't contact customers to initiate a reclaim, many do offer extensive guidance on the claims process on their websites. Others have set up dedicated claims processing teams that customers can contact directly.

The continuing problem of PPI cold calling

The PPI compensation frenzy is far from over - and with the thought of a deadline looming, there are plenty of companies hoping to claim a generous slice of the multi-billion pound PPI pie.

That means that the cold calling will continue.

It may be universally disliked, but companies continue to use it as their main marketing strategy because it clearly works - the number of PPI claims management companies in existence pays testament to this.

We've a guide to the measures households can take to cut down on the number of cold calls, and other types of nuisance call, they receive, here, as well as looking into what the various telecoms companies and regulators are doing to help here.

Meanwhile we'd be interested to hear your experiences of the PPI reclaims process, claims management companies and nuisance cold calling.

Whilst we value your comments we can only provide general information and cannot answer questions about specific cases in the comments, sorry.


15 March 2016
amy lou

I have just had a call from a company called PPI reclaims (0120555312 which is not recognised on returning call) saying that I was due PPI money from a loan. The caller told me how much the loan was, the years I had it and that I had paid it in full. She then proceeded to say that she was going to pass me onto someone else and that I was not let them confuse me that I was to stick to what had been said. Her example was "If they ask you if you have ever had a loan then don't say no, say yes and give them the details of what had been discussed". I was transferred to who ever was sitting next to her and he asked me if I had ever had a loan to which I replied yes only because the woman told me to say that. I was also asked what bank the loan was with to which I replied off the top of my head Barclays (never had an account there) to which she replied that's correct. I even lied about my age. I eventually hung up but they then tried to call me again 3 times. Scam or what????

27 August 2015

I was told they would deliver the money to me, they didn't need my bank account details and when I said I was made bankrupt in 2005 to try and get them off the phone, they said not to worry and not to mention it again? Surely that's wrong?

23 July 2015
sandra smith

I was cold called yesterday by a very personable but persistent young woman asking the name of my bank also my name and address - told her my bank but not my name and address, do you think it could be a scam? She was quite abusive when I suggested this. Sandra.

13 August 2014
Stuart Royle

I got a call from a lady called Taylor Harris yesterday at 4.30PM. She said that her company were working for Lloyds/HBOS and that I was someone who had not applied for a PPI claim yet. She already had my full name and managed to trick me into confirming
my address. My call was cut short only for her to call again after 6PM. I said I was suspicious because she had earlier said that she was based in Halifax but I spotted the number 0191 was not Halifax. I asked her to confirm my bank a/c number which she could not. She said I could call her head office to check but what is the point. I checked with my bank today and they confirmed they would only
contact me by letter.

21 June 2014

They even call the Samaritans' emergency lines and office numbers. I have had them call three times. You tell them to take you off their database, but the call centres can't be bothered or they don't have the authority. Where do they buy all these phone numbers from? Can't someone hack into their computers and jam them?

11 February 2014

I've received 2 cold calls today (11 Feb 2014) from two numbers (clearly linked) offering me PPI recovery under a 'Consumer Protection Agency' sponsored operation. The numbers are 020 3375 6307 and 020 3375 6313. These were unsolicited and because my mobile is a business mobile I have to answer using my name, which the caller picks up and asks if they can speak to [my name] (oldest trick in the cold-caller's arsenal to build the deception that they know you and that they can help you recover lots of money for miss-sold protection insurance policies, etc. etc.). I wish these people could be stopped but living in Britain in 2014 I don't expect it will happen anytime soon. Our Government are failing to address technology that allows scammers to get around the Jurassic consumer protection legislation and delivery framework we rely on - which is more suitable to the 1950's than 2014. And saying that it's inconvenient to get cold-calls is missing the point - thanks to impotent legislation and failed government policies to manage the Telco and internet service providers we are allowing a new breed of cowboy to perform non-economically useful jobs that actually divert productive people from doing something significantly more economically useful for the economy! Modern day Britain where people have given up on our politicians as they clearly don't have a clue how to protect us and remove the blight from cold callers and scammers. And they wonder why we don't vote or show any interest in conventional politics!

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