Done with bank charges? Now reclaim your PPI ripoffs

The Poorhouse has previously mentioned the wonders of reclaiming unfair bank charges amongst these pages. Here, the Office of Fair Trading opined that the charges for doing things like going over your overdraft limit should be more to cover the bank's cost for your actions rather than pillage you for hundreds more pounds you don't have, and many, many people managed to get significant money back from their banks as a result.

But once you're done on that, there's more reclaiming of unfair abuse by financial institutions to be done if you're a victim of Payment Protection Insurance (PPI) mis-selling. Given it is a £5 billion industry with 20 million such policies in force in Britain at the minute, and some of the mis-selling tactics seem to end up in people not even knowing they have a policy let alone what it costs them, it might well be worth your while to check.

A PPI policy is usually sold to you when taking out a reasonably large loan, whether this be in the form of a mortgage, a bank loan, a loan from some dodgy-looking company advertised on Channel 5 or any other such product. It is basically insurance against you not being able to pay back the loan under its normal terms for unexpected reasons that aren't deemed to be under your control. These could include being made redundant and becoming ill and unable to work for instance. On the surface of it, the deal is that you pay a certain premium a month, and should these unfortunate circumstances come into play, the insurance company will pay (or help pay) your loan back and hence save you losing your house, possessions and the rest of your financial life because you yourself cannot pay it back.

However, the premiums you pay are not necessarily cheap. The Consumer Advice Bureau has recently produced a report on the issue. This includes some examples of loans and PPI policies taken out by people that have later become CAB clients. This demonstrated that consumers from their sample were paying up to 56% over the amount they borrowed simply for the PPI insurance. Other examples included an unsecured personal loan for £11000 having PPI premiums of £5133 and hire purchase repayments for a £5059 car totalling £2157 in total. Clearly, some serious additional debt is potentially being taken on by borrowers with these policies.

This could of course be fine if it was a vaguely realistic amount of the cost to provide the cover or at least a fair and informed choice made by the consumer. Unfortunately, in many cases it isn't. Beyond that it seemingly has an extremely low rate of actually helping the very people in need of it most. CAB figures suggest that 85% of their clients have their PPI claims turned down and feel that the industry is far more "about providing an additional source of profit for the financial industry than about protecting consumers".

The CAB was so concerned with its findings that it made a "super complaint" to the Office of Fair Trading who went on to produce a study of the industry in terms of providing consumers with a fair choice and decent value product and latterly to refer their concerns on to the Competition Commission. The Financial Services Authority is also involved, remaining unconvinced for now that current rules governing PPI are giving consumers enough protection against the unfair pressure selling of often useless policies.

So, time for some examples of mis-selling. If any sound familiar, you might be entitled to a big amount of money back. As ever, moneysavingexpert.com has a wonderful guide to such things, so here is a summary of their examples. Check the mse article itself for a much more detailed and useful overview.

  • Employment status: being sold unemployment insurance that is not relevant to you.
  • Pre-existing medical conditions: being sold health insurance that does not cover you for the things you are likely to need it for.
  • Single premium policies: some policies throw the PPI value in with the loan amount itself, meaning part of the loan is actually for the PPI. This means you have automatically paid for the whole insurance term by taking the loan. If you have subsequently cancelled, become ineligible or for any other reason don't need the insurance you might have paid for a service you aren't using.
  • General mis-selling: including being told that specific PPI was a necessary condition for getting credit. It is OK to require that you have PPI of some form (which you may already have under other 3rd-party insurances), but it does not have to be from the same company that is giving you the credit. If you were under the impression that getting their PPI was mandatory, making your loan cheaper, helping qualify for it, forcing you to sign up for their PPI at the time of the loan or any other high-pressure sales technique you might well be eligible for a reclaim. If you were told it couldn't be cancelled, or covered more things than it does or for that matter weren't even told that you were getting PPI at an extra cost to your loan or credit, again you should look into it.
  • Chronic mis-selling: many insurance providers have already been fined for bad behaviour regarding PPI sales. If your policy is with one of them you should be doubly careful to ensure it was sold to you in a fair manner.

So, if you feel that you have been treated unfairly in any of these ways or more, it's time to reclaim the money you have lost over it. This is something you can either attempt to do yourself, or get a company specialised in such reclaims to do it for you. Doing it yourself means if successful you will get all your reclaim amount back yourself. Getting a third party to do it for you will cost you some of your claim but could be less time-and-effort consuming and perhaps less intimidating for some.

The MSE guide covers how to go through the process yourself. To summarise, you need to get in touch with your lender to tell them what your concerns are and why you feel you might be entitled to a refund. That alone might be enough to get a reasonable result. If not, you should go to the Financial Ombudsman Service who will make a judgement although this could take a long time - but hey, if you end up with what you deserve back to you it's probably worth waiting for. There is also the option of the small claims court should it be required.

Alternatively, if you don't have the time or inclination to do it so directly there are companies that assist you. Clearly they are going to require payment for their time and effort, but if it's a case of getting substantial sums of money back you might decide it is worth it. One such company is the PPI Reclaim Service. As well as providing the service itself, their site has a decent amount of information regarding the whole PPI issue. Essentially they will evaluate your claim, contacting you and the lender for any information they need, and then go on to attempt to claim your money back on your behalf via the lender and then the Financial Ombudsman Service if required. If successful, you get the claim amount back, currently minus 25% + £15 to pay for their services - but of course it is wise to check with them if this has changed before going ahead.

You can see people detailing their PPI successes and failures however they have approached it on the MSE forum.

Good luck to all. Some banks and insurance companies seem to be nothing but menaces to consumer well-being. If they owe you money you should exercise your rights to get it back.

This article was supported by PPI Reclaim Service


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