How To Reclaim Your PPI for Free: It's Actually Easy
Some Basics About PPI
With a deadline now in place, you only have until August 2019 to make a complaint about the mis-sale of Payment Protection Insurance (PPI).
Payment Protection insurance has been sold for decades. Payment Protection Insurance can include up to five elements: Accident, Sickness, and Unemployment, plus sometimes Life and Critical Illness. If you have a stand-alone life or critical illness policy, these are general insurance products, not PPI.
PPI was sold along with credit, to protect you in the event you became unable to work because of sickness or disability or if you became unemployed. Here are some examples of credit purchases you could have made where you were sold PPI:
- credit cards
- store cards
- car finance
So, if you bought one of these types of credit, you may have bought PPI as well.
Let's look at some things you may need to consider before you make a claim.
Regulation of the sale of insurance wasn't compulsory until the 14th of January 2005. So many businesses selling insurance before that didn't have to be regulated, though many of your well-known high street banks voluntarily opted to be regulated prior to the 14th of January 2005.
If you were sold PPI by a big financial business like a bank, then chances are the sale was regulated and so the business would have followed certain guidelines. But smaller businesses—such as secondhand car dealers and independent financial advisers—didn't have to be regulated prior to 14th January 2005, and in a lot of cases they weren't.
This means if you were sold PPI on any type of finance before the 14th of January 2005, and the business who sold it to you wasn't regulated (generally smaller independent businesses) you can still make your claim to them, but if the business rejects your complaint, you will be unable to refer to the Financial Ombudsman Service.
Let's look at the flip side to this.
If you took out any form of borrowing after 14th January 2005 and were sold PPI, the business who sold it to you had to be regulated no matter how small a business they were. Because it was a "regulated" sale, if you complain to the business who sold you the policy and they reject your complaint, you have the right to refer your complaint to the Financial Ombudsman Service.
So, let's recap:
What was PPI sold on? Any form of borrowing. It was there to protect you in the event of you being unable to make your repayments for any of the reasons above.
Can I complain if my borrowing/credit was taken out in 1992 (pre 14/1/2005)? Yes you can. If your borrowing was done with a well-known bank or large financial business, they likely became voluntarily regulated long before they had to be. You can still complain to the business if it was a smaller business, but just bear in mind that if they were not regulated then they will not have to give you referral rights to the Ombudsman.
Is PPI bad? No. The reason why PPI complaints have become so popular is not that the insurance policies themselves were bad. It was the way the policies were sold.
What Were the Problems With the Sale of PPI?
PPI mis-sale became very common as there were many reasons why these policies were mis-sold. For example, if you were self-employed when you were sold your policy, some policies (not all) made it very difficult to make an unemployment claim. This meant a lot of people who were self-employed were unable to make an unemployment claim, yet still paying for this policy which did not benefit them. Another example was that some people who bought PPI already had better benefits from their employers, such as their sick pay benefit or insurances, and therefore they paid for an insurance they didn't need.
Some policies were ridiculously expensive, including "Single Premium" policies. These were sold alongside loans, and more scarily, some mortgages. A single-premium policy was added to your borrowing up-front and also incurred interest; in essence it was another loan. An example of a reasonably priced single-premium policy would be £1000 premium + interest to protect a £5000 loan over a five-year term. An expensive single-premium would be £3000 premium + interest on a £5000 loan over a five-year term. You do not need to know the costs of your policy to make your complaint. This is evaluated by the business and then the Financial Ombudsman Service if you refer your complaint to them.
The other type of policies that were sold were called regular-premium policies. These were also sold on loans but mainly on mortgages and credit cards. This type of policies provided better value for the money as there was no upfront lump sum accruing interest from the start of the borrowing. These policies were worked out at a monthly cost for the duration of the borrowing for loans or mortgages. Credit cards had a set cost for every £100 that was on your credit card balance at the end of the month. An average credit card PPI charge would have been 79p per £100. If your balance was £1000 at the end of the month, you would be charged £7.90 to protect it for that month.
Another issue these policies had was that even when they were cheap the benefit was sometimes very low. If we take the credit card PPI cost for example, of 79p per £100, the benefit may have been 10% of the outstanding monthly balance. So if your balance remained at £1000 when you made your claim, this policy with a 10% benefit would have cleared your credit card in 9 months. If the benefit was 5%, it would take a full 12 months for the balance to be cleared (policies have specific wording on how this works). This is where the cost and benefit need to be evaluated.
So as you can see there is a lot to consider when your complaint is assessed. This is nothing for you to worry about. All the issues above that may mean your policy was mis-sold will be assessed by the business and the Financial Ombudsman Service.
How to Complain About MIs-Sold PPI
The process is very straightforward. You do not need a company to do this for you, and your entire complaint can be dealt with in as little as two forms.
The most important part of your complaint is determining who is responsible for the sale of your PPI policy. Any mis-selling of PPI is the responsibility of the business that sold you the policy. It's not necessarily the business that provided the credit, or the business that provided the insurance; the business that sold you the policy is responsible, whoever that may be.
Here are some examples.
- You go into Bank A to take out a loan. They sell you PPI provided by Insurance Z at the same time you take out your loan. Because Bank A sold you the insurance when they were selling you the loan, the complaint is the responsibility of Bank A. This is a common scenario for taking out a loan or mortgage.
- You go into Bank A to take out a credit card. You are not sold PPI in your application, but you receive a telephone call 3 months later offering you PPI, the call is from Bank A. The PPI sale is the responibility of Bank A.
- You go to your local car dealership and buy a car on finance. The car salesman goes through the sale of the car with you. The car dealership uses Bank B for their finance, and the car salesman sells you PPI provided by Insurance Q. But the car dealership is responsible for the sale. Do not get this scenario confused with taking a loan out from your bank to buy a car. If everything was arranged by the dealership, including the PPI, the dealership is responsible.
- You go to see your Independent financial adviser (IFA), Mr Y, and he finds the best mortgage deal for you with Bank S. He then sells you PPI with Insurance J. The sale is the responsibility of your Financial Adviser. This is where it becomes tricky, because a lot of these sales were made before 14th January 2005 and would have been unregulated if your IFA chose not to be regulated. If your scenario is like this, and the PPI was sold after 14th January 2005, your IFA had to be regulated. They may have been acting on behalf of another business or they may have been regulated themselves.
Hopefully you'll now know who is responsible for the sale of your policy.
If your PPI was sold by a well-known established business, you can probably go to their website and print out their PPI complaint form. For all other businesses, it's best to print out the Financial Ombudsman Service's PPI Consumer questionnaire form and send this to this business. You will need to complete this form based on the date you were sold the policy. If you can provide them with the loan/credit card/mortgage number, it will help with them to locate the sale and avoid delays or more paperwork being sent.
The businesses have eight weeks to provide you with a response to your complaint. If you receive a response you are not happy with, check in the letter to see if they have given you the right to refer your complaint to the Ombudsman service. If they have, you should refer your complaint to them straight away so that you do not fall out of the six-month referral deadline. You can do this by simply calling the Financial Ombudsman Service (FOS).
If eight weeks pass with no response, you also have the right to have the Financial Ombudsman service to consider your complaint. You should note the date when you send your complaint off to a business and note when the eight weeks are up. Keep any acknowledgement letters you receive from the business, but refer your complaint to the Ombudsman as soon as the eight weeks are up regardless of whether the business has acknowledged your complaint. Eight weeks is the required time for a business to issue their final response. You can obviously wait for the business to issue their final response letter (FRL) if they have said they will do so by a particular date, but if that date is missed, you are best referring the complaint to the Ombudsman so it can be dealt with as quickly as possible.
And that's it! It's as simple as that. Raising your complaint is very simple and straightforward. Once you either get your final response letter from the business responsible for selling the PPI policy, or eight weeks pass, if you are not happy with the situation, you have the right to refer your complaint to the Ombudsman service, providing the sale was regulated.
So, in a nutshell, here's how you make your complaint.
- Work out who sold you the policy.
- Complete the complaint form for the business responsible, or complete the FOS PPI consumer questionnaire form and send it to the business.
- Wait up to eight weeks for their final response letter. If you see that they give you referral rights to send the complaint to the FOS, then 99.9% of the time the FOS can look at it. If the final response states that the sale was before 14 January 2005 and the business you have complained to says they were not regulated at this time, then you know it was an unregulated sale and you can't refer your complaint to the FOS.
- Make sure you refer your complaint to the FOS within six months of the FRL date, or the business has the right to time-bar your complaint.
- Once the FOS confirm they can consider the complaint you just need to wait for their decision.