Should you be claiming PPI?

The Payment Protection Insurance (PPI) mis-selling scandal doesn't look like it's going away any time soon. In fact the compensation bill continues to climb.


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Barclays and Lloyds Banking Group have both announced increases to the pots of money they have set aside to compensate customers. Barclays has increased its pot by £1.35billion, making a total provision of £4.1billion, while Lloyds has upped its pot by £450million, making a total provision of £7.3billion.

This means that there’s now almost £20billion set aside for mis-sold PPI customers among the nation’s banks, so it’s well worth finding out whether you're entitled to a slice of it. Here’s all you need to know.

What is PPI and why does it have a bad name?

PPI was sold to customers alongside their loan, mortgage, store card or credit card on the premise that, if the customer was made redundant or fell ill and could no longer work, the cover would meet their repayments.

But banks were found guilty of selling these policies to people who would never be able to make a successful claim anyway – for example, the self-employed. In many other cases, the policies were over-priced and littered with exclusions making it equally impossible to claim.

So, in 2011, a high court ruling ordered the banks to pay out compensation to those customers affected. 

There's no time limit on how far back you can make a claim, although it's usually easier if your insurance was active in the last six years...

Will my bank tell me if I was mis-sold?

If you're unsure whether or not you've been mis-sold PPI, the good news is banks have a legal obligation to get in touch with you if you are eligible for compensation. So don't be surprised if a letter lands on your doormat.

However, if you do think you've been mis-sold PPI, you don't have to sit and wait for your bank to contact you – get the ball rolling yourself.

How do I make a claim?

THe first step is to write directly to the lender concerned, tell them what the product was, when it was purchased, and why you think you were mis-sold.

If you're struggling to remember who you got your loan or credit card from, you can check your credit report with one of the credit reference agencies through our credit monitoring channel. All of the details of what you borrowed and from whom will be listed on your report.

The more information you can give your lender, the better. So if you can locate the original documentation, this will stand you in good stead. It's worth noting that on your paperwork, PPI may be called 'payment cover' or 'loan protection' or 'accident, sickness and unemployment cover (ASU)'.

Don't panic though if you can't find any of the documents because your lender should have them on file and be able to tell you whether you've had PPI.

If your account is still open, you also have a legal right under the Consumer Credit Act to get hold of a copy of the original credit agreement for £1. If the account is closed, you can still ask your lender for a full breakdown of your account – but be warned, this can cost around £10.

Then what happens?

Once the bank has received your complaint, it must get back to you within eight weeks to tell you whether your claim has been successful or not. If your bank agrees to pay out, you should receive your money within 28 days, though be warned it can take as long as 12 weeks in some cases.

On the other hand, if you're not happy with the outcome, you can complain to the Financial Ombudsman Service (FOS) which is there to solve disputes between financial services firms and customers. It's independent and free to use.

Complaints to the FOS have now fallen to 2,000 a day, down from a high of 3,000 a day last December.

How far back can I make a claim?

There's no time limit on how far back you can make a claim, although it's usually easier if your insurance was active in the last six years, simply because banks aren't obliged to keep records that are older than that.

It also doesn't matter if you have already paid off the loan or credit card and you're no longer a customer of that particular bank. After all, you were still mis-sold and are therefore entitled to get your money back.

And if your bank has been taken over, you can still complain to the new provider as, in most cases, the new provider will be liable for the old provider's debts.

Is there a time limit on making a claim?

Banks have been pushing for a deadline on PPI compensation claims in a bid to rein in the payouts they have to make, but they have so far been unsuccessful.
Nevertheless, if you think you have a case, you may as well act sooner rather than later.

What to watch out for

Be wary of text messages and phone calls from third party claims management companies telling you that you're owed thousands of pounds. Even if the companies are legitimate they will take a slice of commission from the sum you are repaid, so you may as well go directly to your bank.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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