How to reclaim your PPI premiums
1. Do I have a valid claim?
Payment protection insurance (PPI) is optional and will not improve your chances of getting credit. However, the Competition Commission's investigation into PPI found many people are not aware of this. If you bought PPI alongside a mortgage, credit card, loan, store card or other credit agreement, and were not told it was optional, then you could be entitled to a refund.
Additionally, if, when you took out your loan or credit card, the cost of the PPI element and how it worked was not properly outlined or - as on some internet application forms - the PPI box was pre-ticked, you may have a case.
If you didn't have a job, or were retired or self-employed when you were sold the policy - or had a pre-existing medical condition - and the exclusions on the PPI weren't explained to you, then you could have a claim. Most policies have an age limit of 65 or 70 so if you were over the maximum age when you made the purchase then you too could potentially receive a refund.
Finally, if the provider did not take reasonable care when giving advice to ensure that the policy was suitable for your needs, for example if the policy is to run out before you finished repaying your loan - effectively leaving you without cover - then again you could claim a refund.
2. Does the type of premium make a difference?
If you have a single premium policy, rather than regular premium, this may also be the foundation for a refund. The FSA and PPI lenders agree 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 now 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.
If it rejects your request, take the matter to the Financial Ombudsman Service. 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 is unlikely. Don't use a third party reclaim company, as it will take a large chunk of any compensation.
4. Can I claim now?
Banks have 21 days to appeal the decision and until then all pending cases and future complaints are on hold. If they do not appeal – or if that appeal is unsuccessful – you can submit your complaint.
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.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
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.