Can I Claim Back PPI From My Loans?
Payment Protection Insurance (PPI) is a policy that is sold alongside a loan to provide financial compensation in the event that you are either made redundant, fall ill or otherwise lose your source of income and with it the ability to keep up your loan repayments. Whilst it can provide valuable peace of mind, many policies were mis-sold by the financial services industry in the early part of this century. As a consequence, an investigation by the Competition Commission has identified that a large number of providers have been treating customers 'unfairly' and, as a result, are able to claim compensation.
The key here is not that the insurance cover itself was poor – just that the way the insurance was sold to many customers fell short of what is expected under the provisions of the Consumer Credit Act (CCA). The CCA not only covers credit – but also insurance and especially where the two are sold alongside each other as linked transactions, i.e. where one is dependent upon the other.
Tighter regulations on the selling of PPI were introduced in January 2005. Therefore, the rules about how insurance could be sold were significantly enhanced although many brokers and lenders failed to change their selling practices and continued to offer the product in an incorrect manner.
The main areas where PPI policies can be challenged as unfair are were:
•You were told that the approval of the loan was conditional upon you taking out the PPI cover; •Certain exclusions that limit your ability to claim on the policy were not explained to you before you agreed to the loan and PPI cover;
•The PPI cover was added to the loan without you even knowing or approving that you wanted or needed it;
•You repaid the loan early but received little or no refund of the insurance premium; and •The PPI cover ran out before the end of the loan – i.e. they were not truly linked as a single agreement.
Many PPI policies generated significant commission earnings for the staff of the lenders or credit card companies. They also generated large profits for the providers as the incidence of claim and payouts were low relative to the total premium. For this reason, many institutions were keen to have PPI sold alongside a loan – which was often at a low rate of interest.
As more claims of mis-selling became publicised, it became apparent that there was a systemic failure within the industry and lawyers and other agencies began claiming compensation. The rules and regulations around compensation payments are clear and precise and as more and more people came forward, systems for reviewing and approving claims were implemented. There are now straightforward claims procedures requiring little actual evidence that you were mis-sold the PPI – instead it is clear that certain lenders operational procedures were so weak that most claims are likely to be approved.
Whilst there are many agencies that will process the claim on your behalf, the procedure is relatively straightforward and can be done in easy stages. The website www.moneysavingexper.com/reclaim/ppi-loan-insurance provides a simple guide and templates for the letters that you will need to send stating your claim. There are three – but the final one is to the Financial Services Ombudsmen so hopefully you will not need to get this far. Claiming is free and will cost nothing in the event that your request is not upheld.
If you bought your loan and PPI cover on-line, it may be more difficult to claim since the full terms and conditions would have been available on the website. It is easier to claim if you were sold a loan on the telephone or through the branch where the amount of interaction with a real person would have been higher.
Even if your loan and policy has expired, you can still make a claim if you were still repaying it within that last six years. It may still be possible to claim on PPI from over six years ago, but the reality is that the success rate will be much lower.
So, if you have had a PPI backed loan, mortgage or credit card that has been running in the past 6 years you could be entitled to reclaim part, or all of the premium plus late interest charges (currently 8% p.a.). The procedure is simple and risk free (from your perspective) and if your lender has already been fined for mis-selling by the Competition Commission, the chances of a reclaim being successful are reasonably good.