How to reclaim your PPI premiums

Thousands of people who were

mis-sold payment protection insurance

moved one step closer to getting compensation after the High Court ruled against banks and in favour of consumers. 

When the Financial Services Authority (FSA) stated banks must contact all PPI customers and give them the chance to complain if they suspected they were mis-sold, the British Bankers' Association launched a judicial review in protest.

But a judge opted to uphold the FSA's suggestion meaning banks could be liable for billions of pounds in compensation.

Initially the banks had said they would appeal the decision, but following a u-turn from the Lloyds Banking Group, the British Bankers Association said that its members would follow suit.

So how do you know if you can claim? Read our guide to making a complaint and download a template letter to help you get a refund.

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 below.

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.