How to claim for mis-sold payment protection insurance (PPI)

Payment protection insurance (PPI) has been mis-sold to millions of people, and if you submitted a claim on or before 29 of August 2019 there’s a chance you could still receive compensation.

What is payment protection insurance?

Be aware

You had until 29 August 2019 to complain about the sale of PPI.

Find more information about this and more information about the claims process on the FCA website.

Payment protection insurance (PPI) is commonly sold alongside other financial products such as credit cards, store cards, mortgages and different types of loans.

It is designed to cover the payments in case of illness, accident, redundancy or death.

What PPI compensation you could reclaim

The average customer payout for loan PPI compensation is around £2,000.

How do I know if I was mis-sold PPI?

PPI and bankruptcy in England and Wales

If you become bankrupt, any successful claims for the mis-selling of PPI could be paid to your bankruptcy estate, and not to you. Don’t make any claims yourself as you could end up being out of pocket if you pay any fees or commission to a claims company. Find out more on the website.

Have you ever had a mortgage, credit card or loan? If so, you may have been mis-sold PPI.

Previously, PPI was sold when you took out a loan, credit card, mortgage or car finance deal. The idea was that PPI would cover the monthly payments on your credit agreement if you became ill or lost your job.

However, sales staff often didn’t explain policies properly and they were often sold to people who weren’t eligible for cover. For example, to people who were self-employed or with pre-existing medical conditions. As a result, many policies didn’t pay out when people needed them to.

A more recent guideline for mis-selling is about commission lenders received on PPIs. If more than 50% of the commission of your PPI went to the lender and you weren’t told about it, you also might be owed compensation.

If you remember having a similar conversation but not told the correct details, there’s a chance you were mis-sold PPI and can claim.

What if I didn’t remember being sold PPI

There’s a chance you were sold PPI without realising it. In some cases, salespeople didn’t explain PPI policies when they were sold.

Not sure what something means? Have a look at our Protection insurance glossary.

Or they may have said you had to take out PPI, or that you had a better chance of getting a loan if you took it out. If this happened to you, odds are you were mis-sold PPI.

It was worth checking any mortgage, credit card and loan agreements. If you see any of the following terms in the documents or similar, it’s likely you were sold PPI:

  • payment cover
  • protection plan
  • loan protection
  • ASU
  • loan care.

How to claim PPI

At this point it is too late to make a claim for mis-sold PPI, but for those who claimed on or before 29 of August 2019, this section could help explain the process.

A claims management company will take a quarter of your PPI compensation or more – there is no need to use one.

  1. Find all the relevant documents and make copies. This includes anything that shows you’ve taken out a policy and shows you making payments for it. If you’re not sure whether it’s relevant, copy it.
  2. Write a letter to the mortgage, loan or credit card provider who sold you the PPI. It shouldn’t take too long to do if you use the Money Advice Service PPI complaints template letter or you can fill in the questionnaire which most of the banks have on their own websites. It’s a standard form that is also used by the Financial Ombudsman Service. Send all the documents you think might be relevant. Explain why you think you were mis-sold PPI.
  3. If you don’t get a response or decision within eight weeks, send a complaint to the Financial Ombudsman Service (FOS). The Ombudsman will ask you to fill out a questionnaire to decide whether or not you’ve been mis-sold PPI.
Find out more about claiming for mis-sold PPI and the 29 August 2019 deadline on the FCA website.
Learn how to complain on the Financial Ombudsman Service website.

What makes up PPI compensation

If you’re entitled to compensation, your pay-out will be made up of three parts:

A refund of the PPI premiums you paid.

Any interest you paid on those premiums.

Statutory interest paid at 8% for each year since you got the PPI policy (paid in recognition that you were deprived of your money for some time).

Tax on PPI pay-outs

The statutory interest you are paid is treated as savings income for tax purposes. This tax is automatically deducted from your pay-out.

However, if you’re a non-taxpayer, or have not reached your personal savings allowance, you can claim this money back though HMRC.

Find out more about tax on PPI pay-outs and how to claim it back on the Money Saving Expert website.

Don’t use claims management companies

Claims management companies will offer to help you with your claim. You might have seen their adverts, or even received texts or phone calls from them.

Don’t use them.

Making a claim is straightforward. Just follow the steps listed above and use the template provided.

Why avoid them

A claims management company will typically take a quarter of your compensation or more. They might also try to charge you an upfront fee, and some companies have gone bust, without doing any work to reclaim customers’ money.

Some claims management companies say banks process their claims more quickly, but this isn’t true. You won’t lose out if you make the claim yourself. In fact, you’ll end up with more money.

How to complain about a claims management company

On 1 April 2019, the FCA took over the regulation of claims management companies (CMCs) from the Claims Management Regulator. Not all CMCs transferred to FCA regulation – some CMCs chose to stop managing claims instead.

If a CMC is currently handling a claim for you, but opted not to be regulated by the FCA, they may have contacted you to explain how to continue your claim.

If you are unhappy with the service you have received from a claim’s management company, you can now complain directly to the Financial Ombudsman Service.

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