Ever taken out a PPI policy?
If you have ever taken out a PPI policy and you can demonstrate that the policy was mis-sold to you then you may be entitled to claim a refund of all policy premiums paid. Follow the steps below to work out if you have a potential claim.
1. Do you have PPI?
If you have Payment Protection Insurance, then there should be references to this in your credit agreements or loan documents, so you should review these carefully. Remember that because of increased media coverage of the PPI mis-selling scandal many financial services providers have rejected the term “PPI” in favour of other descriptors for the the same product. Some common examples include “debt repayment cover”, “credit protection insurance”, “credit card insurance” and “loan insurance”. It is likely that anything which appears to be an insurance product is really PPI.
If you no longer have access to your loan documents, you should review your loan or credit statements for any unexpected charges or deductions. These may be PPI premiums.
2. Was the sale regulated?
In order for your policy to have been mis-sold, you need to demonstrate that the PPI provider or salesman acted in a way which constituted a breach of rules, regulations or codes of practice. However, the selling of PPI has not always been a regulated activity and if the sale was unregulated then you will not have a PPI mis-selling claim.
Since 2005 the selling of PPI has been a regulated activity for which the Financial Services Authority is responsible. Since 2005 any business which sells PPI has been required to comply with legally binding FSA regulations. Before 2005 only PPI policies sold by banks and building societies were regulated.
3. Is there evidence of mis-selling
Your policy will only have been mi-sold if the PPI provider marketed or sold the policy to you contrary to Financial Services Authority rules in force at the time of sale. The type of behaviour which constitutes a breach of FSA rules is varied, but it can include the use of pressure or “hard sell” tactics, as well as failure to disclose policy restrictions and exclusions, recommendation for a product which is unsuitable with reference to our needs and requirements, or failure to declare any commission received.
What are the most common grounds for making a mis-sold PPI claim?
You will only be entitled to compensation for mis-selling if you can demonstrate that the salesperson breached Financial Services Authority rules on the conduct of insurance sales. FSA rules are complex and convoluted, but in essence they require all PPI providers to deal with consumers in an open and honest manner, to recommend products which meet the consumer’s needs and requirements and to refrain from unfair sales practices. It is not possible to exhaustively list the behaviours which might contravene these requirements, but below are some of the most common scenarios:
- The consumer was unaware that he had PPI – although this may sound unlikely, a surprisingly high number of people have paid towards a PPI policy for years without ever being aware of this. This arises because until recently financial services providers were allowed to sell PPI to consumers alongside loans and other credit products. In a number of cases, salespeople have added PPI cover to the loan without first seeking the consumer’s consent.
- The consumer was pressured into taking out PPI – a common tactic is for the salesperson to mislead the consumer into believing that his loan application will be rejected unless he agrees to purchase a PPI policy.
- The consumer was younger than 18 or older than 65 – people who are younger than 18 or older than 65 are not eligible for PPI cover, the former because people under 18 cannot legally enter into an insurance contract and the latter because people over the statutory retirement age have limited protection from dismissal and redundancy and so are excluded from cover by policy restrictions.
- The consumer worked less than 16 hours per week or was a fixed term or temporary employee – people in these categories are more likely to be made redundant or lose their jobs for some other reason and so most policies contain terms which exclude them from cover.
- The consumer was sold an inappropriate policy – FSA regulations require the PPI provider to conduct adequate questioning to determine your financial situation, employment status and the affordability of PPI cover for you, however in many case the salesperson will simply recommend the policy which is most expensive or which pays him the largest commission, regardless of whether this is suitable for you.
- The consumer was not advised of his right to purchase on the open market – often credit providers will try to create the impression that you are restricted to PPI products which they supply, but FSA regulations require them to make it clear to you that you may be able to purchase similar cover for less on the open market.
How much is my claim worth?
Successful claimants in mis-sold PPI cases are entitled to be put back in the financial position they would have been in if they had never taken out the PPI policy in the first place. This is easy to calculate in cases where the consumer pays a monthly premium in return for PPI cover – he simply receives a full refund of PPI premiums, plus interest on the total amount. However, in the case of PPI policies which covered large loans or mortgages it was usual for PPI providers to offer a policy which provided cover across the lifetime of the loan in return for payment of a single up-front premium. This premium was often several thousands of pounds and so would be added to the loan, where it would accrue interest.
In some cases the amount of PPI charged under this single premium system was almost as much as the original loan itself. This is illustrated by the table below which contains data gathered by Citizens Advice Bureaux across the country.
| Unsecured | £8,993 | £2,217 | 25% |
| Unsecured | £11,000 | £5,133 | 47% |
| Hire Purchase | £5,059 | £2,157 | 43% |
| Hire Purchase | £6,895 | £2,317 | 34% |
| Unsecured | £5,600 | £744 | 13% |
| Secured | £25,000 | £12,127 | 49% |
| Secured | £35,000 | £10,150 | 29% |
| Hire Purchase | £4,300 | £2,394 | 56% |
| Unsecured | £13,000 | £3,367 | 26% |
In each of these cases, the claimant in a mi-selling case will be entitled to a full refund of all payments made towards the PPI element of the loan, as well as having the PPI element of the loan and any interest which has accrued on this written off.