Payment Protection Insurance (PPI) is a type of insurance to cover your repayments on a loan, mortgage, or credit card if you are unable to meet them due to accident, illness, or unemployment.
Although the insurance can be useful in principle, these policies were frequently sold to customers that PPI did not suit. Here's how to get your money back if you were mis-sold PPI.
Can you reclaim PPI charges?
Who can reclaim PPI?
Many PPI policies would not protect you at all if you found yourself either ill or redundant so you may not only be throwing money away by continuing with it, you could find yourself in line with a rebate.
Lenders often encouraged customers to take up policies without explaining what they entail, how much they will cost and checking whether they will cover them.
There are many circumstances in which PPI was mis-sold, including the following:
You were unemployed when the policy was sold to you
You were not told the cost of the PPI, or it was rolled into the cost of your loan payments without being explained to you
You were told that you had to buy PPI alongside the loan as a 'compulsory' product
You were older than the upper age limit of the policy that you were sold, usually 65
You have a chronic medical condition which could prevent you from working that would not be covered by the policy
Policy features, such as the cancellation terms, were not explained when you took the policy out
The lender did not explain you had the right to shop around for a PPI policy from another source
The Financial Conduct Authority has taken action against the firm that sold you your policy
You were sold the policy against a store card or a loan.
You had a joint loan but the PPI was arranged in a single name
Your insurance policy was not arranged to cover the full loan term
You tried to cancel the policy but were unable to.
If you genuinely feel you have been mis-sold your PPI policy, then you should make a claim. You have nothing to lose, it will cost you nothing, and you may get all of your premiums back.
Which credit agreements do you have PPI on?
There are plenty of credit agreements that could have come with PPI, including loans, credit cards, mortgages and more.
Read our guide to find out how to check the financial products you have taken out over the years: Which Credit Agreements do You Have PPI On?
Do you need payment protection insurance?
If you have existing PPI policies in place now is a good time to review whether you actually need them.
Read our guide, which looks at the limitations of PPI and some alternatives: Do You Really Need Payment Protection Insurance?
Cancel unwanted PPI policies
Speak to your existing provider to check there are no tie-in clauses in your existing contract. If there are, and you were mis-sold the policy, you may be able to get the contract cancelled and your premiums returned anyway.
If your policy doesn't suit but you've decided that you need some form of protection in place, you will need to find another policy before you cancel; that way you'll always be covered.
Has your PPI provider already had action taken against it?
The FCA has already had to discipline plenty of companies that sold PPI.
You can check whether yours is one of them by searching the FCA register. In particular, look at the firm's 'disciplinary history' for black marks relating to PPI mis-selling.
If your insurer has already got a ruling from the FCA against it for mis-selling, the chances are that you are more likely to be successful when you make a claim. However, either way, be prepared to fight your corner.
How much should you reclaim in PPI premiums?
Remember that you might have been paying PPI on a variety of loans you have, so you may need to make claims against more than one company.
Work out what your monthly payment is on PPI and multiply this by the number of months you have been paying it to get a final figure you can reclaim.
If you paid a single premium at the start of the policy for your cover, then get your paperwork out and find out what you paid initially.
You should add 8% onto the final amount you work out to get the actual figure you are going to reclaim. This is the statutory amount of interest you would have applied to your claim if you went to court.
Lodge your payment protection insurance claim
Once you decide how much to reclaim, you will need to put your request for a refund in writing to the lender that sold you the policy.
It is important to be clear and concise in your argument, and you can use our template letter as a starting point.
Follow up your PPI claims
Insurers and lenders have to follow guidelines when they are dealing with complaints, and one of these is that they respond to all complaints within eight weeks of the initial approach.
If your lender has not responded within this time, write again. You can use our template letter as a starting point.
If you do not receive a reply to this within 14 days, you can complain to the Financial Ombudsman Service.
Appeal their decision
If the company refuse your claim and deny any wrongdoing, do not give up - lenders often do this to put people off claiming.
Read our guide, Rejected PPI Claim: Don't Give Up On What You're Owed, to find out how to go about telling the lender why they need to refund you.
If the lender offers a refund or compensation that is less than you think you deserve, you do not have to accept it. Write back and insist that you get the full compensation as you have outlined.
You can also use the Resolver website, who offer a free complaints service.
Accept an offer of PPI compensation you are happy with
If the provider's offer of compensation is sufficient, write to the company to formally accept, and then you will receive the money.
Your policy will be cancelled, so if you want to maintain any form of PPI cover, you'll need to get another policy put in place.
Take your complaint to the Financial Ombudsman Service
If you still do not get a satisfactory response, or you are unhappy with the level of compensation you are offered, complain to the Financial Ombudsman Service (FOS).
You can only make a claim with the Ombudsman if you have already complained to the company that sold you the PPI policy. You also cannot use the FOS for adjudication if you've already been to court.
The Ombudsman will review evidence from you and the provider and then adjudicate. You will need to fill out the complaint form available on the FOS website, which they can help you complete if you phone them.
Send them the initial policy documents you received from your lender, bank statements that will support your compensation claim and full details of when you have spoken to the lender about this issue.
Most complaints are addressed within 3 months but it can take up to 9 months in some instances.
Should you accept the Financial Ombudsman's Ruling?
The FOS will look into your claim and either grant or reject it based on the evidence provided.
If you are happy with the adjudication, accept it - it will then be binding for both you and your PPI provider.
If you are not happy with the ruling you can reject it. You could then request that a senior Ombudsman reviews the work your FOS case worker has done up until this point.
Alternatively you can take court action instead...
Decide whether to take your PPI claim to court
How much will going to court cost you?
If you use the small claims court, their fees are calculated in bands, so the smaller the claim, the cheaper the fee. You can check the fees for your claim amount on the Gov.UK website.
If you took a different route, the costs for lawyers and court fees can start to rack up, meaning you could easily lose more than you might gain. If the likely fees outweigh the possible gain then you should consider whether your cause is worth pursuing.
If the FOS ruled in your favour, there is a real chance that the courts would do the same. However, the same also applies if your claim was refused by the Ombudsman.
Should you take your case to court?
Going to court is always a gamble; you can never be sure which way a decision will go, especially if you have already had the Ombudsman rule against you.
Make sure you can afford a decision going against you, including if you had to pay costs for the other side.
It may be tempting to use a 'no win, no fee' solicitor. However, you may find it hard to get one of these lawyers to take your case if the Ombudsman ruled against you already.
Submit your court claim
You can submit your court claim through paper documents that you can download from the Gov.UK website.
If you want to submit your claim online, then you would go to Money Claim Online.
Once you have decided, you need to fill in the paperwork and lodge your claim.
The court will send you a Notice of Issue once the claim has been received, and the defendant will be sent a copy of the claim too.
The provider can admit guilt, partially defend, or defend the claim. If it defends itself against you, then you will need to go through the court process.
If the judge rules against you, you can appeal the ruling if you have a good reason.