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Tuesday, 5th May 2009
There are two ways of claiming back mis-sold Payment Protection Insurance PPI?
Do It Yourself (DIY) or employ a firm to do this for you.
You can enter a claim by using our free templates;
You will need to delete sections that do not apply to you; you will also need to add some personal details.
You will find the free template letters at the bottom of this page.
What is Payment Protection Insurance PPI?
This is an insurance policy designed to cover the monthly payments if the policy holder becomes ill or is made redundant.
The term PPI is also used to describe other policies that you can buy separately to protect your debt repayments - but these are more properly called accident, sickness and unemployment (ASU) policies or income protection.
In May 2009 the Financial Services Authority (FSA) called on all firms to stop selling the insurance now because of "ongoing concerns" with sales.
Single premium Payment Protection Insurance (PPI) will be banned officially from October 2010.
When will I be offered it?
It is often offered alongside a personal loan, credit card or mortgage or secured loan and many lenders make it sound compulsory, but it is purely optional. However, sometimes a lender may only approve you for a preferential interest rate if you take out their PPI.
Will I still be offered PPI if I just increase the amount on an existing loan?
Be careful as some lenders may simply add the extra insurance to cover the additional borrowing without telling you. You need to ask if PPI will be added.
Do I have to accept the policy?
The practice of insisting that a borrower take out the lender's PPI in order to qualify for a better interest rate is regarded as among the most unscrupulous of tactics. Always ask to see the monthly repayment and total repayable minus the PPI, this way you can work out how much extra the PPI will cost you. It is wrong for loan and credit card providers to include it in your quote without telling you. You can refuse to accept it.
Isn't this a good thing to have?
Yes if it covered most eventualities. The problem is that many bank and credit card providers that sold the insurance policies failed to point out the potential pitfalls.
What sort of pitfalls do you mean?
These policies will often not cover the whole debt and will only payout for a limited period only.
They are often confusing and full of exclusions in the small print therefore making it hard for someone to claim, e.g. those that have a fixed term of contract or are self employed and only pay in restrictive circumstances.
Is it a waste of money?
Not necessarily. Most of the policies that lenders offer you are probably no good but if you are concerned about keeping up your payments and wish to have some form of protection then you can purchase what is often referred to as a 'stand alone policy' so that you have cover should you need to make a claim.
Well what do you expect if the policies are cheap, you get what you pay for don't you?
These are definitely not cheap. The insurance premium usually needs to be paid up front; sometimes this can amount to several thousands of pounds. Because of this many potential policy holders would not see this as attractive so to get round this the banks and credit card providers have simply just added it to the cost of the loan or credit card.
Does this mean I also pay interest on this insurance as well?
Should all this have been explained to me when I was sold this insurance?
Yes. Banks and credit card providers have a duty to draw to your attention the 'key' points of your policy, this should include the upfront premiums on which the interest is charged, cancellation charges and that it may not cover you if you are self employed or on contract work. To mention it in passing in the small print is not acceptable.
So why do the banks sell this policy?
Because most banks and credit card providers earn small margins as it is a highly competitive market they recoup this loss by selling the PPI which not only earns them money but also pays hefty commissions to the agents and staff, this then fuels the mis-selling.
Do many people take out PPI or is it something new?
It is estimated that of the 7 million individuals per year who purchase PPI only 4 percent make a claim and a quarter of these are rejected.
How does this compare with other forms of insurance?
The Office of fair Trading, OFT, estimates that the actual claims paid out is 20 percent of the total premiums collected, this is compared to 54 percent of motor insurance, so you can see this is a massive earner for the banks and credit card providers.
How do I know if I need PPI?
This will depend on your individual circumstances, i.e. how much savings you have or what other provisions you may have made. You may also have sufficient cover from your employer so check this out first. If you reside with someone and both are at work then the risk is also reduced.
How do I know if I have a good case to claim back these premiums?
Anyone who has PPI on a personal loan, mortgage or credit card and believes these points were not fully explained has a good case for getting these premiums refunded.
Furthermore if when you were sold the policy and you were on a fixed term of employment contract or were self employed then the policy will probably not pay out if you need to claim therefore it is useless and you will need to claim back the premiums paid to date.
Click on our Letter 2 (bottom of this page) it is a word document and highlights all the points for you to consider to help you decide if you have been mis-sold the product.
Tell me more about cancelling PPI
This depends on the type of the insurance and the loan you have. Most of the policies arrange for the PPI to be paid on a monthly basis so you are able to cancel the payment at any time, you will need to check this with your provider. However some policies have a 12 month contract or for the term of the loan which will make it difficult to cancel the payments.
In some cases whereby the loan is paid off early you may not be able to claim back your premiums. The reason being that if you agreed to a loan amount upfront, with the insurance costs included then you may be asked to repay the full amount.
I feel I have been mis-sold PPI, where do I start?
You either enter a claim yourself or you employ a firm to do this for you.
Why is the date I took out the policy so important?
PPI only came under the FSA jurisdiction in January 2005; previously any policies sold prior to this date were not covered by the Financial Services Authority, FSA, rules and regulations. However the Financial Ombudsman Service, FOS, has taken a much softer approach on this date and will no longer bar helping people that have taken out a policy before January 2005.
If you have a policy prior to this date and feel you have been mis-sold then it may be worthwhile contacting the FOS to see if they can help. They will only get involved once eight weeks have passed since you raised your complaint with the PPI provider and you have received a closure or 'deadlock' letter.
Can I claim PPI even if I am bankrupt?
The Insolvency Service has issued a warning that bankrupts could be liable for Claims Management Company PPI mis-selling fees if they make a claim during and even after they have gone bankrupt. Those individuals that say have been mis-sold payment protection insurance but have yet to make a claim are warned that they could be held responsible for all or part of the commission charged by a Claims Management Company (CMC) even if an award is paid to the Official Receiver (OR) or Trustee overseeing the bankruptcy. Bankrupts could be liable for Claims Management Company PPI mis-selling fees
Request Terms & Conditions
Use this letter to get information about your policy. Skip this if you know your policy terms and conditions.
Demand your refund
This is our general letter in word format to demand a refund. You will need to delete sections that do not apply to you; you will also need to add some personal details (in green text).
When you have finished remember to keep all the text the same colour and post the letter recorded delivery - you can print off proof of postage on the Royal Mail Website.
If you need more information about taking a claim to the Ombudsman then click here to visit their website and locate the complaint form.