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 (FCA), all claims must be made by 29 August 2019.
The FCA says that while 29 August 2019 is the general deadline for PPI complaints, some consumers may have less time to complain. Those who may have earlier deadlines include customers who received a letter from their provider about the way PPI was sold. It says most of these letters were sent between 2012 and 2015.
Consumers who made an insurance claim on a PPI policy that was rejected by their insurer may also have a shorter deadline. Please check with your provider.