Did you sign up for PPI as part of a credit agreement?
You’ve probably heard about the mis-selling of payment protection insurance (PPI) and the refunds people have received. Because of the high payouts, a lot of claims management companies have sprung up, trying to earn commissions from claiming refunds on behalf of their clients.
However we highly recommend that you reclaim any mis-sold PPI for free.
In this post we’ll answer some of your questions and show you how to reclaim PPI for free, through forms available on MoneySavingExpert.com and Which?.
What is PPI?
PPI is a product sold alongside loans and credit cards to help customers with repayments in the event of accident, sickness and unemployment.
Some customers have been able to benefit from the cover such a policy provides, however over the years some customers have been mis-sold PPI policies.
Some of these policies have been mis-sold and lenders have had to compensate their customers, setting aside billions of pounds for this purpose.
How do I know if I had PPI?
If you’ve kept the loan or credit card paperwork then the original agreement will show if you took out PPI. Make sure you check for wording such as card or loan “protection cover”.
If you don’t know who your lender was then getting a copy of your credit report will show all debts that were active within the last six years.
Once you receive the report look through it for evidence of PPI.
How do I know if the policy was mis-sold?
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
Reclaim PPI for free though MoneySavingExpert and Which?
While fee-charging companies would have you believe the process of reclaiming PPI is complicated (they do want to attract your business!), the process is straightforward.
Importantly, you have no less chance of reclaiming PPI if you do a personal claim than if you were to go through a claims management company.
To help you we recommend that you use the free template letters on the MoneySavingExpert and Which? websites to make your claim.
For example, one of our employees spent a few minutes submitting a claim to their bank using the MoneySavingExpert.com template letters. A few weeks later they received a cheque for over £2,500 (see the PPI letter they received on our Facebook page). It really is that easy.
If you don’t want to (or aren’t able to) do this yourself then get help from a friend or family member.
I’m a CCCS client – are there reasons why I shouldn’t make a claim?
Your 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 an un-discharged bankrupt or are 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’re currently on an IVA or DMP with us we’ve explained how the refund will benefit you in the ‘how do I get the money’ section below. You should put any reclaimed money towards repaying your debts.
If I’m successful with my own claim how do I get the money?
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 CCCS), the lender may automatically put the refund towards reducing your debt to them rather than sending you a cheque.
Clients on an IVA
If you’re currently repaying your debts through an IVA with us, the money will need to go into the IVA, as a windfall.
Read this blogpost for more details on reclaiming PPI on an IVA.
Clients on a DMP
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, we would expect you to use that money to pay a lump sum into your DMP, which we would then be shared with your creditors.
Either way you’ll be debt free sooner. The illustration below shows what difference a refund could make.
For example:
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, that will shave a whole year off your debt free date
What if I want to pay to make a claim?
A last resort is to use one of the hundreds of claims management companies. If you decide to go down the route of paying for 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 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 will 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 the lender rejects the claim?
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 mis-selling case and either rule in favour of you or the lender. Free templates are available on the MoneySavingExpert or FOS websites. 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.
And finally…
We hope that if you reclaim PPI you follow the guidance above, claim for free, and get out of debt quicker.