What is PPI?
PPI has become a popular word in recent years due to the PPI mis-selling scandals. So, what is PPI and how can you make a PPI claim? In this guide, we cover everything you need to know about PPI from making a PPI complaint to finding out whether you have PPI.
What is PPI?
PPI stands for Payment Protection Insurance. PPI was sold with personal loans, mortgages, credit cards and more. Essentially, PPI was sold by companies when you borrowed money from them.
Payment Protection Insurance (PPI) was sold to help repay your loan for a short period of time if you’re unable to work due to illness, an accident, redundancy or death.
Whilst this might sound like a sensible insurance to purchase alongside a loan, how PPI was sold led to a huge PPI mis-selling scandal. The Financial Conduct Authority (FCA) discovered that PPI had been mis-sold and over £33bn has already been paid back to people who complained about the sale of PPI.
PPI complaints deadline
It’s important to note that the PPI deadline for complaints was 29th August 2019. This generally means that you can no longer reclaim a refund for mis-sold PPI. However, some circumstances may still allow you to make a claim which we will explain later on in the guide.
How do I know if I have PPI?
If you took out a loan before 2012 when PPI was still being sold, it’s possible that you were sold PPI with it. These are products that might have been sold with PPI:
- Credit cards
- Personal and secured loans
- Business loans
- Hire-purchase agreements
- Point-of-sale loans
If you remember having a conversation about ensuring your repayments or ‘cover’ of any kind then you could have been sold PPI if you bought any of the above before 2012.
Even if you don’t remember having a conversation about PPI, there’s still a chance that you were sold it as often people weren’t aware they were being sold PPI.
You can check the original paperwork that you were given when you took out the loan to see if PPI was added to the sale. It might not be called PPI but something like ‘protection cover’. You can always call your loan provider and ask if you can’t find the original paperwork.
Why was PPI mis-sold?
PPI was often mis-sold due to a lack of communication and explanation of who the product was eligible for. This means that PPI was often sold to people who would never be able to claim if they were unable to make their loan repayments.
For example, if you were self-employed or had pre-existing medical conditions, then you would never be able to use your Payment Protection Insurance (PPI) to claim if you were unable to pay for your loan due to illness or redundancy etc.
Sales staff weren’t explaining PPI properly and were just bundling it with any loan they sold. This meant that mis-selling was rampant among PPI customers.
Is everyone who was sold PPI owed a refund?
No, not everyone who bought PPI was mis-sold the product. Many people knowingly agreed to purchase PPI as it can be a useful product to have.
You were only owed a PPI refund if you were mis-sold the product. We cover these cases in our checklist below:
PPI mis-selling checklist: How to know if you were mis-sold PPI
So, how do you know if you were actually mis-sold PPI? Take a look at our checklist below:
- Were you told PPI was compulsory?
Sometimes people were told that they must buy PPI from the same provider as the loan to be accepted. This is mis-selling and shouldn’t have happened. If the salesperson did any of the following, you were mis-sold PPI:
- Didn’t make it clear that PPI was optional or that there was a cooling-off period.
- Implied it would be more expensive if you didn’t take out PPI.
- Implied taking out PPI would help your application.
- Was pushy and you felt you couldn’t say no.
- Would not let you continue with the loan application unless you signed up to PPI.
- You didn’t know you had PPI
Many people are surprised to learn that they’ve been paying for PPI for years and didn’t even know it! This is because it was mis-sold to you without you even knowing.
If you bought in person or over the phone, the salesperson was responsible to make sure you understood what you were buying. If you didn’t even know you had PPI, you were likely mis-sold.
If you bought it online, this is a bit more complicated. Usually, all the terms are available for you to read online and it’s down to you to make sure that you read and understand them.
However, if you signed up with a provider that was using pre-ticked boxes, you would have had to opt-out of PPI rather than opt-in. Lenders agreed to stop doing this in 2007 so if you took out PPI before then, you have been mis-sold.
- You were sold the wrong thing
Being sold the wrong form of PPI is also a form of mis-selling. Here are some cases where you might have been sold the incorrect package:
- You already had insurance cover
- You have a joint loan but PPI is only in one name
- The PPI term is too short and doesn’t cover the length of the loan
- You weren’t allowed to cancel your policy
- You were self-employed, unemployed or retired
If you were self-employed, unemployed or retired when taking out PPI then you were mis-sold as PPI doesn’t cover people in these circumstances. So, if you were to make a PPI claim, you wouldn’t have been accepted even if you’d been paying for the policy for months or years!
If the salesperson was made aware of your situation but still suggested you get PPI, then you were mis-sold.
If the salesperson didn’t ask about your employment situation and sold you PPI, this is also mis-selling.
- You had pre-existing medical conditions
Most PPI policies exclude people with pre-existing medical conditions as this makes you more likely to need to use the cover. Before taking out PPI, you should have been told this and asked about your medical history.
If pre-existing medical conditions weren’t at all mentioned in the sale of your policy, this your PPI was mis-sold and is void.
- You’ve had PPI
The Pelvin case suggests that PPI is a breach of the fairness rules in the Consumer Credit Act. This means that simply having PPI could mean you were mis-sold.
The Financial Conduct Authority (FCA) says an unfair relationship between lender and borrower exists if the sales commission was above 50%. Salespeople who sold PPI typically received a commission of 67%, making it an unfair relationship.
How to make a PPI claim
As the deadline has now passed, there are only certain circumstances that will allow you to receive a PPI refund. There are as follows:
1. I made a PPI claim before the deadline but haven’t heard back
If you claimed before the 29th August 2019 PPI complaints deadline then you should have heard back within eight weeks of submitting your claim. If you didn’t hear back within that time, you could have escalated your complaint to the Financial Ombudsman Service (FOS). You needed to do this within six months of your last contact with the firm you were complaining to.
However, firms have been overwhelmed by the number of complaints about PPI. This means that some people are still waiting to hear back from their PPI claim in 2019. Banks are expected to let customers know when to reasonably expect a response. So, ask your bank when you can expect to hear from them and then wait patiently.
Escalating to the FOS won’t necessarily speed up the process.
2. I missed the PPI deadline - what are the exceptional circumstances to still make a claim?
Most people who missed the 29th August 2019 PPI deadline WON’T be able to reclaim now. However, if you intended to submit a complaint before the deadline but were unable to due to exceptional circumstances then you may still be able to claim.
Banks have said that they’ll still review PPI reclaims that cite ‘exceptional circumstances’. These claims will be reviewed on a case-by-case basis.
Unfortunately, ‘exceptional circumstances’ are as vague as they sound! However, it’s usually something like a critical illness that prevented you from reclaiming. Such as being hospital-bound.
3. If you want to submit a PPI reclaim now, you’ll have to go to court
If you’re still determined to make a PPI reclaim even after the deadline, you’ll have to take it to small claims court.
However, there’s no guarantee that you’ll get your PPI refund this way so if you hire a solicitor, make sure that you do it on a no-win, no-fee basis. If you do it alone, you’ll need to understand PPI and have built a strong argument.
With small claims courts, you need to complain within six years of the event taking place, which would be six years after the PPI was sold. You’ll also need to provide evidence of the fact that you bought PPI.
4. Don’t forget to reclaim the PPI payout tax back!
If you’ve already been successful with your PPI payout then you can reclaim the tax you originally paid on your payout. This could be worth hundreds or even thousands of pounds!
So, make sure you reclaim the tax. If your payout was taxed you can use the 'Claim a refund of income tax deducted from savings and investment' form R40 available on the government website.