Working at StepChange debt Charity, we often see clients going through a...
Reclaim PPI for free
You’ve probably heard about the mis-selling of payment protection insurance, the ‘reclaim PPI’ adverts, and the huge refunds some people have received. Because of the big payouts that some people are entitled to, claims management companies have sprung up, trying to earn commission by claiming refunds for you.
But reclaiming PPI isn’t as difficult as you might think, and we highly recommend that you reclaim any mis-sold PPI yourself. It’s free, and we can show you how.
In this article we’ll explain a bit more about what PPI is. We’ll also show you how to find out if you had PPI, tell you about the deadline for claims and explain the new ‘Plevin’ rule which applies to any PPI sold from 2008 onwards.
What is PPI?
Payment protection insurance (PPI) is a product sold alongside loans and credit cards to help customers with repayments in the event of accident, sickness and unemployment.
While some customers have been able to benefit from the cover such a policy provides, in the past some customers were mis-sold PPI policies. Because of this, lenders have had to compensate their customers, setting aside billions of pounds for this purpose.
How do I reclaim PPI myself?
While fee-charging companies would have you believe the process of reclaiming mis-sold PPI is complicated, the process is straightforward.
You have no less chance of reclaiming mis-sold PPI if you do a personal claim, than if you were to go through a claims management company.
Before you begin you’ll need to know:
• Who the lender was
• What policy you had
• How it was mis-sold
Is there a time limit on claims?
There is no limit on how far back you can claim PPI, but be prepared that if you don’t have your paperwork you may be unable to make a claim.
Lenders are only required to keep the last six years of records, so if your debt is older than 6 years and you don’t have the paperwork, it may be very difficult to make a claim.
If you had a loan, store or credit card and know who your lender was:
Check your paperwork
If you’ve kept the loan or credit card paperwork then the original paperwork will show if you took out PPI. Make sure you check for wording such as card or loan “protection cover”.
Request lost paperwork
If you’re unsure whether you had PPI and can remember who the lender was (or still bank with them) it’s worth contacting them to check.
Some banks provide online enquiry forms for you to make a request. In other cases, you may have to pay a small fee ranging from £1 to £10 for a copy of the agreement.
If you don’t know who your lender was or have the original paperwork:
Get your credit report
Get a copy of your credit report which will show all debts that were active within the last six years. You can then request the paperwork from the lender by writing to them, and check for evidence of PPI.
What is mis-selling?
There are many reasons a policy may have been mis-sold, however the main ones are:
• You weren’t aware that you had signed up for PPI
• You weren’t given enough information about PPI to fully aware of what it covered
• You were told that you had to take out PPI to be given the credit
• The policy wasn’t right for you as you couldn’t have made a successful claim
You’ll need to explain in your claim how you were mis-sold the PPI unless the ‘Plevin rule’ applies to you.
The new ‘Plevin’ rule
A recent ruling in court has meant that in many cases, just having PPI means that you were mis-sold I under the ‘Plevin rule’. If over 50% of your PPI cost went to the lender as commission and this wasn’t explained to you, you are due a refund.
For this to count though, you need to have still had an active account from 2008 onwards.
Yes, but depending on your situation you need to bear in mind that you may not always be able to keep the claim funds, and you’ll need to cancel the policy.
Your insurance policy will be cancelled by the lender when you make a claim so think about whether you may need to make a future claim. If you do need to keep some cover you may be able to find a cheaper policy through an alternative provider.
If you’re within your debt relief order (DRO) moratorium period we recommend that you call us to discuss your individual situation FIRST, as you probably will not find you benefit from making a claim.
If you make a claim after you’ve gone bankrupt, you must pay all of the refunded PPI to the official receiver, even after you’re discharged from your bankruptcy. This means you won’t benefit from making a claim.
Debt management plan
If you’re on a DMP the lender may put the refund towards reducing your debt to them rather than sending you a cheque.
Alternatively, if the lender sends you a refund directly, you’ll need to discuss this with your DMP provider. Your refund could help you reduce your debts or pay for essential household items which may have been unaffordable otherwise.
Your DMP payment is £240 per month and you have £10,000 left to repay. Assuming your creditors have stopped interest and charges, you’ll currently be debt free in 3.5 years
If you received a refund of £3,000, then that will mean your debt free date will be a year earlier
If you’re currently repaying your debts through an IVA any refund you get will need to go into the IVA. In some cases, this can mean you can settle your agreement early.
Read this article for more details on reclaiming PPI on an IVA.
How will I receive my refund?
If you’re up to date with payments to the debt with the PPI, or you have repaid the debt in full, then you should receive your refund directly from the lender, usually by cheque.
If you’re in arrears (say if you’re a client of ours), the lender may automatically put the refund towards reducing your debt to them rather than sending you a cheque.
What if I’d like a company to manage my claim?
If you decide to go down the route of paying to make your claim, you should:
- Avoid any company charging an up-front fee for their service. You’ll end up paying a fee regardless of whether your claim is successful, so you’ll could be out of pocket
- Be aware that fees vary and most companies charge up to 40% + VAT of any money refunded. This means for every £100 you’re entitled to receive, the company will charge up to £48, leaving you with only £52
- Be aware that the lender may automatically put the refund towards reducing your debt to them rather than sending you a cheque. This means that you could then receive a separate bill from the claims company for their fee which you’ll need to find the money to pay
- Select a company authorised and regulated by the Ministry of Justice to carry out claims management activities. You can use the online search facility on the Ministry of Justice website to check a company is authorised
What happens if my claim is rejected?
If the lender rejects the PPI claim, and you still believe your claim is valid, you can appeal to the Financial Ombudsman Service (FOS). This is a service set up by the government to provide free and independent resolution to complaints between consumers and financial institutions. They’ll review the case and either rule in favour of you or the lender.
Due to the large volume of PPI complaints escalated to the FOS, it may take a number of months for them to review your complaint.
The Financial Conduct Authority (FCA) who regulates the banking industry has now set a deadline to finalise all PPI claims by 29th August 2019.
We recommend that you start to investigate your claim as soon as possible to beat the rush!