How to reclaim your PPI premiums
Here’s our guide to getting your money back, plus the interest you could have been earning on it.
1. Do I have a valid claim?
PPI is supposed to cover loan repayments if, for example, you lose your job, or stop working due to illness.
But in many cases it was sold inappropriately. You might have a claim if the lender (or financial adviser) didn’t explain:
- the insurance was optional.
- significant policy exclusions, such as against pre-existing medical conditions, those who are unemployed, self-employed or retired, and age limits - most policies have an age limit of 65 or 70.
- you would pay your premium as an up-front lump sum.
- your premium would be added to your loan, increasing your interest payments.
- that your insurance might not cover the full period of your loan (most single premium policies only last for five years).
- the level of commission it would earn from your policy (i.e. if you think your lender earned a high level of commission (50% or more) and this was not made clear to you when you bought the policy).
- …or provide evidence that the policy was suitable for you.
In addition, if there was any suggestion made that the insurance would improve your chances of getting credit, that’s also grounds for complaint.
If you’re unsure whether or not you bought a policy, trawl through your paperwork to find out. Your bank, building society or credit card provider will hold records for up to six years, but there’s no harm in asking it if it’s got paperwork going further back in time.
2. Does the type of premium make a difference?
If you have a single premium policy, rather than a regular premium, this may also be the foundation for a refund. The Financial Services Authority (now replaced by the Financial Conduct Authority) and PPI lenders agreed in March 2007 that borrowers who had cancelled their single premium policies should be refunded, overturning a previous no-refund policy on these contracts. This means that if you've cancelled a single premium policy for any reason, you can claim a proportional refund, plus interest.
The Financial Ombudsman Service says the majority of complaints that it upholds are related to single premium policies sold on unsecured loans.
3. How can I get a refund?
Write to your lender and ask for a review. You can download a template letter at the end of this article.
You DON’T need to use a third party reclaim company to make a claim, as at the least it will take a large chunk of any compensation you get.
If it rejects your request or doesn’t respond within eight weeks, take the matter to the free Financial Ombudsman Service.
You can also escalate your case to the Financial Ombudsman Service if your bank offers a settlement but you think it’s less than it should be, although bear in mind the amount you’re offered might depend on whether you’ve previously made a claim or not, or if you owe the bank money.
If you want to check the costs of your policy, ask your lender to send you a breakdown of your account - without paperwork a refund may be trickier. Following a ruling by the Financial Conduct Authority, all claims must be made by 29 August 2019.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.