Reclaim PPI: the insider's guide
Think you might be owed PPI? Find out how to reclaim cash from Julie Finlay, a qualified solicitor who has handled PPI contracts for leading high street banks.
Payment Protection Insurance (PPI) is a policy that was sold with many financial products such as loans, mortgages and credit cards.
Many people have since found that PPI wasn't a suitable product for them and are therefore seeking to reclaim the cost.
However, this isn't necessarily true in every case: for many, PPI was providing valuable protection on borrowing payment in the event of unemployment, accident or illness.
Anyone who believes that they may have been mis-sold PPI may be able to make a claim against their lender and have either all, or some, of the monies refunded to them.
But they'll first need to establish whether PPI was added to their account and, if it was, whether the product was actually mis-sold. That's what we'll look at in this guide.
How to check whether you had PPI
There are two easy ways of establishing whether PPI has been added to an account:
- Most bank statements will clearly show PPI being deducted on a monthly basis. However, it's also important to check the start date of the policy too, since some PPI payments were made 'upfront' as a one-off payment.
- If bank statements aren't clear on this then it's worth contacting the bank directly to ask whether PPI has been added and perhaps asking for a copy of the terms and conditions which were applicable at the time of sale.
Have I been mis-sold PPI?
Whether or not PPI has been mis-sold very much depends on how the product was sold and/or how it was explained at the time it was taken out.
While all PPI policies are slightly different, in essence they provide that an agreed sum of money is paid out each month to either fully or partially cover the monthly payment due, usually for a period of up to 12 or 24 months (again, that's dependent on the lender's own terms and conditions).
Consequently, insurance such as this undoubtedly could prove invaluable - particularly against larger products, such as mortgages. In some cases, then, it was not mis-sold.
For those that still suspect it was, below are a few key questions that should be considered as regards eligibility to claim:
- Were you specifically asked whether you wanted PPI? For example, can you remember exactly where the product was taken out and how it was explained to you?
While some consumers might have a very vivid recollection of how the policy was taken out or even have documentary evidence of it, others might not be able to recall this as easily, particularly if it was taken out some time ago.
However, it's really important to try and establish the exact point of sale. For example, was it taken out in branch or was it taken out somewhere else, such as a supermarket, or online?
This can be a very important factor for the lender when deciding whether the policy was mis-sold since it differentiates between whether the sale was 'advised' or 'non-advised'.
- Were you informed that the PPI was optional?
PPI has never been a compulsory product, nor would it ever increase a consumer's chances of obtaining credit.
PPI has always been available as a financial product and could also be purchased from other sources, not just the lender in question.
- Were you informed of the key exclusion points?
Regardless of lender, most PPI policies have certain key exclusions which would automatically render a claim invalid. For example if the applicant:
- was unemployed, retired or self-employed at the time the product was taken out;
- had a pre-existing medical condition;
- exceeded the upper age limit (usually either 65 or 70) i.e. reached this age during the lifetime of the PPI policy;
- already had alternative means of meeting payments in the event of unemployment (such as savings, an employee benefits package or income protection plan). This is particularly true of anyone in the armed forces, or emergency services, for example.
If any of these points are satisfied then it may be worth making a claim.
How much am I entitled to reclaim?
How much a person is able to reclaim very much depends on when the product was sold and how much the PPI was for.
Once a lender is satisfied that a refund is due, they will usually produce a full redress calculation and send it to the customer for agreement prior to any payment being made.
How far can I backdate a claim?
Generally speaking claims can be backdated to the time the policy was first taken out.
However, it's important to know that if the policy ended over six years ago then the statute of limitation means that some banks won't have records dating back any further than this, so the claim may well be limited to the information they still have on file.
Can I reclaim if I'm in debt, or I didn't pay?
Claims can still be made against a lender even if the account is in arrears - however, it's worth noting that arrears may be deducted from any refund due.
This varies from lender to lender but, in some cases, deductions can be made from a refund without prior permission.
How to make a claim - reclaiming PPI
Ok, so now that we've looked at eligibility let's go on to how people make a PPI claim.
Is paying a firm to reclaim PPI worthwhile?
While there are now many claim management companies (CMC's) dealing with mis-sold PPI complaints it's as easy to claim through the lender direct and will ultimately save on any unnecessary fees.
CMC's offer to deal with PPI complaints directly with the lender but they also charge a large amount of commission on any refund payable and will still have to obtain detailed information in order to process the claim.
Making a claim to the lender directly is easy. In fact, most lender's websites now contain full details on how to lodge a claim or this can be done by calling into the local branch and asking for guidance.
There's no need to pay a claims management company at all.
What do I need to do?
In most cases, the lender will request that a questionnaire be completed.
This is a standard document produced by the Financial Ombudsman Service which collects various information about how the policy was sold and allows the bank to make an informed decision on whether it was actually mis-sold.
As part of the decision process, the lender may also contact the borrower by telephone to clarify some of the points contained within the questionnaire and this often gives the consumer a better opportunity to make their case as to why they believe the product was mis-sold, or perhaps to clarify any points that weren't clear in the application.
Click through here for a copy of the FOS consumer questionnaire.
Are there any deadlines for claims?
While there are no current deadlines to make a claim against mis-sold PPI, it's best to do it as soon as possible and ideally within the 6 year limitation period, since this means the bank will still have all the relevant documentation relating to the product on file.
How are claims assessed?
Once the bank receives a claim it will send an initial acknowledgement letter and usually an information leaflet from the FOS which explains what happens in the event the complaint doesn't get resolved after a full review.
The acknowledgement letter is also likely to set out when a review is likely to take place and perhaps detail some of the initial timescales involved. This will vary from lender to lender.
If a claims management company (CMC) has been instructed, the claim will be handled in exactly the same way although the lender will also advise its customer that all correspondence will be dealt with via this third party, as opposed to the customer directly. It is then a matter for the customer to maintain contact with the CMC for any further updates as the claim progresses.
The bank then has eight weeks from the date it received the complaint before the matter can be escalated to the FOS, although it can request further time if additional information is needed.
Once the lender has fully assessed the PPI complaint - and perhaps requested further information by telephone - it will then decide whether or not to make an offer of compensation.
Should I accept the first PPI offer?
The bank is likely to reach one of three conclusions when assessing a PPI complaint:
- It can reject the claim, in its entirety, although it must give full reasons for doing so.
- It can partly uphold the claim and make an offer of compensation. For example, if it agrees with some - but not all - of the complaint points raised.
- It can uphold the claim in full and make an offer of compensation.
In addition to producing a redress calculation relating to the actual refund of PPI, the bank should also apply interest at a rate of 8% (which is the same amount a Court would award interest under the County Courts Act 1984) and may also offer a D&I ('distress and inconvenience') payment of £300, although the latter is not obligatory.
It is entirely a matter for the complainant as to whether they accept the initial offer or escalate the matter to the Financial Ombudsman Service.
What should I do if my claim is rejected?
The bank must give a full reason for rejecting a claim.
Since this is likely to be their full and final decision it will then be necessary to escalate the complaint to the Financial Ombudsman Service for further review.
This must be done within six months of receiving the rejection and is entirely free of charge to the customer.
The majority of PPI cases that are referred to the FOS are actually awarded in favour of the customer so it's certainly worth pursuing this step if necessary.
Taking a claim to the Financial Ombudsman Service
It's relatively easy to take a claim to the FOS. They will initially ask for copies of all documentation in order to fully consider a claim and perhaps request some further information over the telephone.
To assess the case properly, the FOS will contact both the lender and the customer to fully establish all the facts and then make an informed decision on what the business (the bank) should do.
Whilst much of the necessary information is contained on their website they can also be contacted on 0300 123 9123 and are happy to provide advice on what they can do in the event of a dispute.