Payment Protection Insurance

Payment Protection Insurance (PPI): What is it?

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Our guide explains what PPI is, how it was mis-sold and how you can claim it back.

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If you have a telephone or email address, then you have probably been contacted by a sales person to discuss PPI and how to claim it back. But what is PPI and why is it such a confusing concept?

Payment Protection Insurance (PPI) covers loan, credit card and debt repayments in the event of unforeseen difficulties that could prevent you from making a repayment, for example if someone becomes ill and can’t work.

It was sold as a way of keeping you to your repayment plan, but the ways in which payment protection was mis-sold then prompted court rulings and compensation claims for hundreds of millions of pounds.

How was PPI mis-sold?

PPI was often sold to people who simply would not be able or eligible to make a claim, often without their knowledge, or to those who were covered by other policies or through different means.

But up until 2012, if you went to the bank to take out a loan, finance deal for your car, or a credit card, then there’s a chance you’d have been sold PPI.

Banks and other financial institutions often explained PPI poorly, missing key details such as what it covered, whether the customer really needed it and whether or not they’d be able to make a successful claim.    

In some cases banks simply added it to loans without customers’ consent or falsely conveyed it was compulsory upon taking out a loan.

Do you have a claim?

The best way to find out if you had PPI is to check old statements, especially if you had a loan before 2012, but it might not come up as PPI on the paperwork.

More than likely it will say ‘protection cover’ or something that sounds similar, and can be found as an itemised feature on your statement.

If you’re unsure if you’ve been mis-sold PPI, you can simply get in touch with your credit provider and ask them directly for a copy of your agreement.

If you do have a claim, be careful how you make it as there are a lot of third party companies that might take a big chunk of your compensation money for helping you claim it. It’s not compulsory to use a third party to make a claim.

How to claim compensation

First of all, make sure you have the relevant documentation you need to make the claim, such as:

  • Your original loan or credit agreement.
  • Statements from your provider.
  • Any relevant correspondence between you and your provider.

Then, contact the organisation that sold you the PPI, which could be a bank or credit card company to start the compensation request formally.

You need to include the following information in your claim letter:  

  • A credit reference number or PPI number.
  • The date on which the PPI policy was agreed.
  • The financial product the PPI was connected to, say, the loan or credit card.
  • Why the PPI was mis-sold, for example if you weren’t eligible or if you weren’t aware of it.
  • Current contact details of yourself and anyone else affected by your claim.

There are plenty of free online templates you can use and adapt to the specifics of your claim. Alternatively, Resolver offers a free service where you can raise and resolve your claim through their online claims platform.

If your PPI provider ignores you, denies you claim or offers you an agreement you don’t agree with, then you should get in touch with the Financial Ombudsman Service (only after six weeks of waiting in the case of being ignored).

They are an independent organisation who will then evaluate your claim and make a ruling on the case, which the financial service provider must adhere to.

Can everyone get a refund?

In short, no, because PPI was a useful and legitimate product if sold properly. If you knowingly took it out and were fully aware what it was for and how it worked, then you are not eligible for a refund.

Only those who were fraudulently sold PPI have the opportunity to receive compensation.

Don’t lose out on your claim

There are many companies who will offer to handle your claim for you, but this will take a lot of your compensation money.

Sure, it takes away most of the hassle and paperwork necessary to claim, but considering these claims are often worth thousands of pounds, is it worth losing a large percentage of your claim?

For instance, if you are awarded £5000 compensation, the claims company you use could take up to a thousand pounds to cover their costs. This seems a waste of money, when it is a relatively simple process to do it yourself. 

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