While every effort’s been made to ensure this article’s accuracy, it isn’t intended to be seen as legal advice and no liability can be accepted for any claimants who rely upon the information given.
Anyone who’s got or had a personal loan, secured loan, credit or store card may be able to reclaim £1,000s. The mis-selling of Payment Protection Insurance (PPI) on these products has been so severe, some people mightn’t even know they have it. This is a step-by-step guide, including template letters, to reclaim the cost of loan and card insurance.
Report PPI Successes, Reclaim PPI Discussion
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PPI reclaiming: How easy is it?
PPI is a hot topic, with two of the main consumer regulators, the Office of Fair Trading (OFT) and the Financial Services Authority (FSA), carrying out investigations into high-pressure selling tactics that have resulted in so many polices being inappropriate and therefore mis-sold.
What does reclaiming involve?
Unlike just Cancelling Loan Insurance, reclaiming means not only are you going to save money on future payments, you’re also getting a refund on the money already paid because the policy was mis-sold.
All you need to do is check if you have the insurance and if you fit into one of my mis-selling categories. As well as loans and cards, PPI is sold alongside mortgages, overdrafts and catalogues (basically anywhere you borrow money) so check your statements to see if you’ve been paying without knowing.
If you think you were mis-sold send one of the template letters to your lender and in the worst-case scenario, take your complaint to the Financial Ombudsman Service or other relevant trade association, which is completely free.
As major providers are being called to account, it’s more likely that if you’re eligible, you’ll be able to reclaim without a huge fight. However, this article’s aim isn’t to allow people to grab a quick cash hit, it’s about showing you how to check if your policy’s a dud (which sadly is often likely) and, if so, how to get your money back. For a useful summary of what is involved listen to the Radio 2 PPI Reclaiming discussion (24 minutes).
How far back can you go?
Decide from this list which is most relevant to your situation:
- If your policy started in the last six years, whether you’re still using it or not: Reclaim and ask your lender for a copy of the paperwork if you no longer have it.
- If your policy started over six years ago and you are either still using it, or it ended within the last six years: Reclaim and ask your lender for a copy of the paperwork if you no longer have it. Your chances of success may be reduced if you have been aware of the mis-selling for some time, you have already complained or your account is very old.
- If your policy ended over six years ago and you have the paperwork: Reclaim, although your chances of success are reduced, as it will depend on what you can remember about the sale.
- If your policy ended over six years ago and you do not have the paperwork: Do not start a reclaim. As lenders only have to keep records for six years, if no one has a record of the contract a reclaim is unlikely to be sucessful.
When not to reclaim
If you’ve received a payout from your insurance, i.e. money to cover your loan or card repayments, you won’t be able to say the policy was mis-sold so this system doesn’t really apply to you. You may be able to cancel your insurance though.
Reclaiming almost certainly means that your insurance will be cancelled, as you are effectivly saying it is not suitable to your needs, so only start the process if you definitely want your insurance to come to an end.
Keep up to date with PPI changes in with the weekly MoneySaving email
PPI exposed: Why it’s so often mis-sold
The real profit from selling loans or credit cards often doesn’t come from the products themselves, but from the Payment Protection Insurance sold alongside. There are around 20 million PPI policies in the UK, generating over £5 billion a year for the companies involved. Yet it isn’t the insurer that reaps most of the reward, it’s the company selling the loan.
The insurance costs much more than you think
Let me give you the typical numbers for a Cheap Loan to start with, so you can see quite what a fiddle this can be:
Borrow £10,000 over five years at 6.5% interest
Monthly repayment without insurance: £195
Typical monthly repayment with insurance: £230
While this difference might not look too big, when you actually consider it over the term of the loan, it’s huge, as the table below shows:
Monthly Repayment |
Total Repayment |
Total Cost (interest + insurance) |
Insurance Cost |
|
Uninsured |
£195 |
£11,700 |
£1,700 |
- |
With Insurance |
£230 |
£13,800 |
£3,800 |
£2,100 |
The cost of the insurance almost always dwarves the interest cost, so it’s unsurprising many believe this is the most over-priced financial product around. Worse still, the Office of Fair Trading says only around 20% of insurance claims are successful, so even if you’ve got PPI, it mightn’t give cover when you need it.
You may have been sold insurance without realising
Most people would find it virtually impossible to calculate how much the monthly repayments on a loan should be without a spreadsheet. Some banks and building societies take advantage of this by only quoting the ‘with insurance’ figure, yet without mentioning the word insurance; saying something like "the fully protected loan will cost…"
How many people actually realise that their monthly quote includes £2,000 insurance?
Below are a couple of MoneySavers’ success stories for inspiration:
"Just received notification that I’ll have my PPI refunded! I took out a loan in January 2003 and I took the PPI because they would not give me the loan without taking it, which shouldn’t happen. I sent my letter and less than a week later they told me that I’d be getting £1,191 back! My letter stated that they had mis-sold me the policy. My loan will be finished early now! No fuss and no hassle at all. Result!!"
The same can work on secured loans too:
"About two years ago I took out a £40,000 secured loan and was told I needed to also take PPI worth £7,200 or I wouldn’t be accepted. I did not know any different and stupidly took out the loan. Recently I contacted my lender to complain but it said that I signed the agreement and that was that. I then contacted the Financial Ombudsman and a few months later I have just received a letter from my lender saying that they admit fault and taking advice from the FO they enclosed a cheque for all of the PPI plus interest, a whooping £8,500."
If you reclaim PPI, report any success and failures so others can gain from your experience.
PPI itself isn’t bad: if you manage it correctly
Actually there’s nothing wrong with PPI for those who need it. The problem is it’s far too expensive for what it is and it’s appallingly sold, so many people have totally unsuitable policies.
The job of PPI is to cover loan or card repayments in case of accident, sickness or unemployment (or sometimes just accident and sickness). Nothing wrong with that, providing you’re aware of the following four facts:
- The insurance cost isn’t in the APR.
If you get a loan with insurance the interest rate (APR) you pay is irrelevant: an 8.5% loan can be cheaper than a 7% loan, because the APR doesn’t include the insurance cost, just the original loan amount (see Cheap Loans article). - You may only be able to claim for one year.
If you ever need to claim on your insurance, due to losing your job or being ill, many providers restrict each claim to 12 months no matter how long your agreement runs for. So if you claim one year into a five year loan you won’t be covered for the final three years payments, even though you’ll be paying for the insurance. - Standalone insurance can be over 70% cheaper.
If you need insurance, it’s possible to get similar cover at around a third of the cost, simply by buying a specialist insurance policy separate to the loan. For more details read either the Cheapest Loan Insurance or Cheap Credit Card Insurance - You may be able to cancel and switch expensive insurance.
If you already have a loan with insurance from the bank, you should be allowed to cancel it. Check if this is possible, then examine if you truly need the policy; if you do then you should save money by getting a standalone loan insurance policy and cancelling the existing one, meaning much less of your cash is paying enormous commissions. Full details in the Cut Loan Insurance Costs article.
To show the impact of this, after my ITV1 Tonight programme on switching PPI in Jan 07, I was inundated with people who’d saved thousands, including someone who was going to save more than £20,000 over the life of a secured loan.
Reclaiming changes fast. Stay up to date with the weekly MoneySaving E-mail
The ‘Have I Been Mis-sold?’ Checklist
As most policies are bought with a loan or credit card rather than standalone, many rely on information provided at the time of sale. As such, sellers have a responsibility to inform you about the insurance terms & conditions, both good and bad. All polices will have certain exclusions and you should have been told about them.
It’s worth adding at this point that if you bought your loan or credit card online, reclaiming’s more difficult as the full T&Cs are usually available there. An exception to this is if you purchased from a lender using pre-ticked boxes, meaning you had to opt out of the insurance rather than opt in. In July 07 all lenders agreed to stop doing this but if you took out an agreement before this date check your policy for insurance.
You may have been mis-sold if you fit into one or more of the following categories:
- Are you self-employed, unemployed, redundant or retired?
If you’ve been paying for a policy which includes ‘unemployment’ cover, a reclaim may be possible. If you don’t need unemployment cover and mentioned this when you took out the policy or were never asked about your employment status at all, read the detailed mis-sold unemployment cover section. - Have you had medical problems in the past?
Most policies exclude existing medical conditions, meaning you are unlikly to be covered for any medical problems you have had in the past. If you weren’t informed the policy could be affected by medical problems or were never asked about your medical history, read the detailed pre existing medical condition section. - Has your provider already been fined for mis-selling?
Many major providers have been fined for systematically mis-selling cover, and more are expected soon. If yours has, it’s very likely you’ve a case. To check and get more info, read the mis-selling providers section. - Were you sold a ‘single premium’ loan policy?
A single premium policy is where the whole cost of the insurance is added as a big lump sum at the start of the agreement, which is then repaid over the term of the loan. If you had one of these polices and left or changed the agreement part way through, you may be eligible for a part refund, read the single premium section. - Were you given full details of the insurance?
This covers anything from being told the insurance was compulsory, to not knowing you had even purchased PPI when taking out the loan. As you should be told about the full terms of your insurance, any lack of information could make the sale unfair, so if you don’t think you were given full details read the general mis-selling section.
The different types of mis-selling
Before getting into this, if possible get hold of a copy of your policy’s terms and conditions. If you no longer have them or can’t find them, contact your lender to ask for a copy (but make sure it dates back to the time of your agreement as terms will change over time).
To help use this: Sample Template Letter
(right click to save the file)
Employment status
Have you been paying for a policy which includes ‘unemployment’? If you don’t need unemployment cover, perhaps because you don’t work or are self-employed, and mentioned this when you took out the policy, or were never asked about your employment status at all, a reclaim may be possible.
Is the policy suitable?
The unemployment element of PPI is only suitable for people who were ‘working’ at the time they took out the policy, therefore you should have been asked about this at the time of application.
Example question: Are you in permanent employment, self-employment or contract employment for more than 16 hours a week?
Of course, if your policy only covers accident and sickness, with no unemployment element, this section doesn’t apply to you.
What is classed as ‘working’?
Providers have different definitions, so it’s important to examine your policy in detail.
If you’re self-employed, check whether your specific set-up is covered. As the ‘unemployment’ element is a substantial part of the insurance cost, many who are self-employed have been paying for a semi-useless policy and this could’ve meant a huge waste of money.
Those who were unemployed at the start of the policy (including students and stay at home parents), were almost definitely mis-sold the insurance as, obviously, you wouldn’t be covered for losing your job. The same applies if you knew you were going to become redundant or retire when you purchased the policy.
If it isn’t suitable, were you mis-sold?
Assuming the policy isn’t suitable, we must establish whether the salesperson bothered to check. Remember, it’s the situation you were in at the time you got the cover that counts, so if you were an employee then, but are now self-employed, that’s not their fault - unless you’ve subsequently asked if the cover was still suitable and been misinformed.
It’s likely you were mis-sold if either:
A. You made the salesperson aware of your situation and they suggested you get it anyway.
B. You weren’t asked about your employment status at all.
Age is an issue too
Most polices have an upper age limit of 65 or 70, after which you’re not covered for anything. If you were older than this when you took out your policy, you were definitely mis-sold. If you have passed the age limit since taking out the policy, your cover and therefore payments should have stopped, but if they haven’t for any reason you’ll at least be entitled to a refund of payments made since passing the age limit.
This situation is rare, as providers’ records should flag up someone’s age being too high from their date of birth, but do check.
What to do if you were mis-sold?
Read the other categories to check there aren’t more reasons to complain and then write a letter to your lender. Full details and template letters in the how to reclaim section.
Pre existing medical conditions
Most policies exclude ‘pre existing’ medical conditions, meaning if you try to make a claim on your insurance for a problem you had before, it won’t payout. Therefore lenders should ask about health issues when you get a policy, and if you weren’t informed the policy could be affected by medical problems or were never asked about your medical history, a reclaim may be possible.
Example question: Have you had any illness, accident or other treatment which resulted in you being off work for more than 14 days?
What is a pre existing condition?
Each provider has its own rules, but most are strict and may decide whether to pay an insurance claim based on what it considers to be reasonable for you to have known about before the policy started.
If you make an insurance claim on health grounds insurers may ask for medical records or proof you didn’t have the problem when you took out the policy, and will probably turn it down if you've had a similar medical problem before.
This is one of the biggest reasons insurance payouts are rejected as providers often take a ‘broad brush’ approach, for example if you had a bad lower back, they may decide not to pay for other unrelated back problems.
Were you asked?
Salespeople are not obliged to have a detailed medical discussion, but if they didn’t mention medical exclusions at all, the policy could be void. If you’ve had medical problems in the past this is not enough to make a reclaim, the key point is whether, at the time of application, you were told this was an important part of the policy and were asked to disclose any past health issues.
Some insurers provide medical cover if you have been symptom free for a few years prior to taking out the policy, so do check your own paperwork carefully. If this applies to your policy you wasn’t mis-sold, so this section does not apply to you.
Other health related issues
As well as pre-existing health conditions, some general health problems are specifically excluded from many polices, such as stress. Check the terms of your own policy carefully to see if any particular conditions are not covered and if you were not told about such exclusions from the policy, or were incorrectly informed when you asked about them, you may have been mis-sold.
What to do if you were mis-sold?
Read the other categories to check there aren’t more reasons to complain and then write a letter to your lender. Full details and template letters in the how to reclaim section.
Has your provider already been fined?
The regulator, the FSA, has said it wants to see better practice and has fined several companies for failing to treat their customers fairly. More fines, which could be for up to £1 million, are expected.
Who’s been fined so far?
- HFC Bank, also trading as "Household Bank" and "Beneficial Finance": Fined £1,085,000, the highest fine to date, in January 2008 for putting customers at an unacceptable risk of being sold PPI when it was not suitable for them. Failings took place in branches between Jan 2005 and May 2007. More Info: HFC Bank
- Hadenglen Home Finance Plc: Fined £182,000 in September 2007 for inadequate systems and controls when recommending re-mortgages and PPI. PPI failings took place between January 2005 and November 2006. More Info: Hadenglen Home Finance Ltd
- Capital One: Fined £175,000 in February 2007 for failing to ensure that 50,000 customers buying credit cards and loans between January 2005 and April 2006 received important information about the policy. More info: Capital One
- GE Capital Bank Ltd: (supplies cards for Asda, Comet, Debenhams and Topshop among others): Fined £610,000 in January 2007 for inappropriate sales of its store cards and credit cards. More info: GE Capital Bank Ltd
- Loans.co.uk: Fined £455,000 in October 2006 for not having appropriate systems and controls to minimise the risk of unsuitable sales. More info: Loans.co.uk
- Redcats: Fined £270,000 in December 2006 for also not having adequate systems and controls in place to minimise the risk of unsuitable sales. More info: Redcats
- Regency Mortgage Corporation: Fined £56,000 in December 2006 for not collecting sufficient information during a PPI sale to ensure its recommendations met customers' demands and needs. More info: Regency Mortgage Corporation
Are you a customer of one of these firms?
If you’re a customer of one of these companies it may have already been in touch with you, but if it hasn’t you should definitely send a reclaim letter asking for justification that your policy was sold with your best interests in mind.
Other companies are likely to be fined too
The FSA is likely to announce further fines, this is important as it hugely strengthens your reclaim, so ensure you get the free weekly email to keep updated on this:
Had or have a single premium policy?
A single premium policy is where the whole cost of the insurance is added as a big lump sum at the start of the loan. You’re therefore effectively borrowing more, which then has to be paid off throughout the loan, including interest on the insurance as well as the loan.
This form of insurance is now frowned upon. In March 07, the regulator, the FSA said it thought they were likely to be unfair to consumers as they were restrictive and most didn’t allow refunds if a contract ended early, meaning you have paid the insurance for the whole term of the loan, even if it is not used.
As a result of the FSA’s report, new and existing loan contracts must now allow refunds if a policy is ended early. This opinion greatly improves the reclaiming case.
How to tell if you have a single premium policy?
This type of policy is mainly sold with loans rather than credit or store cards. If it’s a single premium policy, the original paperwork will show the insurance as a fixed lump sum amount.
If the agreement was after May 05, you would have been asked to sign a separate agreement so you should have extra paperwork for the loan and the insurance.
It’s also noteworthy that these policies are often only valid for five years max; even if your loan term is longer, so you could get a five year policy but end up paying interest on the insurance for the full loan term! If you didn’t realise your cover only lasts / lasted for five years read the general mis-selling section for more info.
When is a reclaim possible?
The FSA has said that new and existing customers should benefit from its agreement with providers and my interpretation is this means it should also apply to past consumers who were treated unfairly. If you had a single premium policy, one of the following applies to you and you didn’t get a refund at the time, you should now contact your lender to ask for a partial refund.
- cancelled your insurance before the end of the policy,
- paid your loan back early (unless this was very near the end),
- had a change of circumstances meaning you were no longer eligible for the cover and informed your insurance provider of this change at the time.
If your circumstances did not change and you saw your policy through to the end you will not be able to reclaim for this section, but do read the other mis-selling categories to see if you can reclaim the insurance for another reason.
The FSA also says that refunds should be “calculated fairly, which may or may not result in a pro rata refund”. Unfortunately refunds tend not to be fully pro rata, i.e. you won’t get back half the cost of the insurance if you have cancelled after half the time, as providers are allowed to include justifiable costs. These costs are usually paid towards the start of your contract but if you do cancel you should still get a good whack back.
Further note for existing customers
If you still have a single premium policy you can’t make a reclaim under this section, yet you may be able to cancel your insurance and get it cheaper elsewhere. See the Ditch Loan Insurance article for more info and read the other mis-selling categories to see if you can reclaim the insurance for another reason.
If you have changed your circumstances since taking out the policy contact your provider as soon as possible to see if you're still covered.
When you try to cancel your insurance without ending the loan, some lenders make you start a new agreement. They are allowed to do this as long as the new loan is on the same or better terms and does not detriment you in any way, for example it shouldn’t be more expensive or last longer. You should ask for this to be done without making a new search on your credit file.
The FSA says: "When consumers cancel the PPI without repaying the loan, some firms will need to reissue the loan without the PPI. Firms should ensure they treat their customers fairly in relation to the terms on which they reissue the loan."
General mis-selling
This covers anything from being told the insurance was compulsory to not knowing you had even purchased insurance when you took out the agreement. Any lack of information could make the sale unfair.
Lenders selling PPI polices are obliged to tell you about the specific criteria of the policy and to confirm it’s the right product for you. However, because PPI polices earn providers a high proportion of profit, staff are often highly encouraged to sell as many as possible, and are well remunerated for doing so, meaning mis-selling is rife.
When you contact a lender by phone or in person if they don’t give you fair, correct and reasonable information it’s likely you were mis-sold. Due to the volume of complaints, the regulators are now hot on the heels of this issue.
Some common examples of PPI mis-selling
Were you told insurance was compulsory?
It’s a common complaint that consumers are told they must buy a policy from the same provider as the loan or credit card to be accepted for the product. Any company that subscribes to the banking code (see list) agrees it will not insist that you buy an insurance product from them, so although it can request that you have PPI from somewhere, it does not have to be from them.
Therefore if the salesperson:
- didn't make it clear the policy was optional,
- implied or stated the loan would be more expensive if you didn’t take the insurance,
- implied or insisted you take out their policy to qualify for the product or help with your application,
- was very pushy when selling the product so that you felt you could not say no,
- would not let you continue with the loan application if you did not sign the insurance agreement as well,
go to the how to reclaim section.
Did you already have insurance cover?
If you were already covered, for example you had a separate income protection policy or your employer provided an illness and redundancy package, and you informed the salesperson that you had this cover but they insisted you also had to take their insurance, or you weren't asked if you had any alternative cover go to the how to reclaim section.
Have you tried to cancel your policy?
Prior to Mar 07 some contracts had terms that said you could not cancel the policy even if you had paid off your loan or had a change of circumstances. Since the FSA looked into these refund terms, cancelling is now possible for all current and future contracts. So if you tried to cancel your policy and were told you weren’t allowed or that you needed to take out a new agreement with different terms, go to the how to reclaim section.
Is the insurance term too short?
Long term loans are often sold with a single premium policy lasting for a maximum of five years, no matter how long the loan is for. If you’ve now checked your policy and found that it does not cover the full term of your loan, but thought that it did, the salesperson should have pointed this out. If not go to the how to reclaim section.
Do you have a joint loan but the insurance is only in one name?
If you’ve checked your paper work and have found that all names responsible for paying back the loan are not covered under the insurance, which is unfair in itself as either could be chased for money if you get behind with payments, and were told or thought that all names were covered, go to the how to reclaim section.
Did you sign up for the finance in a shop?
If you got a store card or insurance on a car dealership loan, it was likely to be sold by someone with no financial background, meaning more room for error, and a whole catalogue of misinformation could have been given. If this happened to you, send a reclaim letter to check the insurance was sold in your best interests.
Just realised you have insurance?
Have you just checked your loan agreement or credit card statements to find that you have been paying for insurance, but didn’t realise until now that you had it or what it's for? Some old agreements, particularly store cards, may have used pre ticked boxes requiring you to opt out of the insurance rather than opt in, which is unfair. Always check and if you’re paying for insurance you didn’t know you had go to the how to reclaim section.
In summary…
If you have an inappropriate PPI product and weren't told it was inappropriate or you don’t think you were given the full information on what the policy would and would not cover, send a letter asking for an explanation.
Keep up to date with PPI changes in with the weekly MoneySaving email
How much will you get?
This is potentially big money. For loan reclaims we could be talking many thousands of pounds. Yet calculating the actual amount is difficult and often unnecessary, as the lender will do it for you.
If you want a rough idea, it’s possible to estimate how much the insurance has cost you so that you can get an idea of the size of the reclaim (of course it then depends whether you’re entitled to all or just a portion of it).
Estimating how much the insurance cost
The amount of insurance is different from product to product.
Loans
Obviously if you know what the insurance costs per month, simply multiply this by the length of the loan to work out its cost.
If not, you can do a very rough estimate as follows. Work out the total cost of your loan, simply by multiplying the monthly payments by the loan length and then take 15% of the total. This is a typical insurance cost (although it can be anywhere between 10 and 30%).
The following table gives some examples.
| Loans: Estimating the insurance cost |
|||
|---|---|---|---|
Monthly Repayment |
Loan Length |
Total Cost (Length x Repayment) |
Estimated Insurance Cost (15% of Total) |
£100 |
3 years (36 months) |
£3,600 |
£540 |
£125 |
5 years (60 months) |
£7,500 |
£1,125 |
£150 |
5 years (60 months) |
£9,000 |
£1,350 |
£200 |
7 years (84 months) |
£16,800 |
£2,520 |
£150 |
20 years (240 months) |
£36,000 |
£5,400 |
Cards
The estimate is more difficult on cards as the amount you owe changes each month. Estimating it is therefore far more of a guesstimate. Yet there is a way to get a very rough idea.
Most card insurance plans cost roughly 80p per month per £100 of outstanding debt. We can therefore work out that for every £100 of debt you have averaged over a year, you’d pay £10 in insurance. In other words, roughly 10% of your outstanding debt in insurance each year.
The following table gives some examples.
Rough average debt |
Estimated Insurance Cost per year (10% of average debt) |
How long you’ve had debt at this level |
Estimated Total Insurance Cost |
£1,000 |
£100 |
1 year |
£100 |
£2,500 |
£250 |
3 years |
£750 |
£5,000 |
£500 |
4 years |
£2,000 |
£10,000 |
£1,000 |
5 years |
£5,000 |
Calculating the charge
If you want to take this a step further and calculate the exact amount that may be owed, this is possible provided you have the paperwork. Though again, it’s not actually necessary as if the lender agrees the reclaim it should do it for you. To do it correctly you will need some paperwork:
- Loans. To do this calculation you need the original loan agreement. This should detail the loan amount, the insurance amount and the type of policy that you have or had. If the amount is monthly you need to calculate the total cost over the life of the policy.
- Cards. Here you need copies of your statements over the time period. Each month, the cost of the insurance should be detailed, so just add that up month by month.
If you don’t have the paperwork
If you want to check the costs and don’t have the paperwork, send a letter to your lender, requesting a full breakdown of your account, specifically including the cost of the Insurance. If you ended your agreement over six years ago your lender may no longer have this information as it only has to keep records for six years. If no one has a record of the account, a reclaim is unlikely to be worth pursuing.
Otherwise your lender has 40 days to send you the info. If it is late you can follow up your letter with a phone call and then report it to the Information Commissioner, as you have a legal right to this information under the Data Protection Act.
For help use this: Sample Letter Template
(Right click this and save the file)
How to reclaim?
The following steps detail how to complain about your PPI policy and I’ve included a full template letter for the different scenarios. As more and more people feedback about their reclaims, the technique will be finessed and improved, so please ensure you're getting my free weekly Moneysaving e-mail which will include updates.
Step 1 Write to your lender
After you have read the mis-selling checklist you should know which area of mis-selling applies to your complaint.
Once clear of the reasons, write a letter to the company that sold you the policy asking for a refund. There’s no need to specify the amount (unless you know how much you want to ask for) as the lender will do this for you, just explain that you think the insurance was mis-sold, that you are writing to complain and you want your money back.
If the seller was acting as an appointed representative of the insurance provider, it will probably tell you to contact the provider instead. Use the address of the branch you visited for your first letter; any follow up can be sent to the head office if necessary.
To help, below is a full template letter to select the most relevant points. You should also enclose copies of any paperwork that backs up your case and send the letter by recorded delivery, keeping a copy for yourself.
To help use this: Sample Letter Template
(Right click to save the file)
Step 2 If not happy, tell it you’ll go to the Ombudsman
At this point, hopefully you will have received a satisfactory settlement offer. However, don't expect it and don't be surprised if it writes back saying something like "we sent you all the documentation." You are asking for cash back, if it can fob you off with an easy answer it will.
So if you get a no, it’s time to get a little bit more militant. Send a simple letter that encloses a copy of your first letter indicating that you’re not happy and would like them to look again at the case. You can also say that if it doesn’t agree then you will make a formal complaint to the Financial Ombudsman Service or other relevant trade association.
If you have been offered a settlement at this point, but you just don’t believe that is high enough, then there is nothing stopping you writing back and giving an amount you would be willing to accept ‘without prejudice’. This means that if your lender chooses not to settle for this amount, it can’t use it against you later.
For help use this: Sample Letter Template
(Right click this and save the file)
Step 3 If all else fails complain to the FOS
If you still haven’t reached a satisfactory conclusion, it’s time to make a formal complaint to the Financial Ombudsman; the independent service for settling disputes between financial companies regulated by the Financial Services Authority (FSA) and their customers.
The FOS is completely free to use, and will adjudicate on whether you should be paid out. It will look at your complaint (see some examples) and decide whether your policy was sold unfairly or unreasonably. It can only do so once eight weeks have passed from the date of your first complaint letter, unless the lender itself specifically suggests you go to the Ombudsman, when it can help sooner.
To make its decision the FOS will look at each case individually, so if yours is a matter of you saying one thing happened but your lender disagrees, the FOS will decide if it thinks the lender acted fairly. As the party with responsibility to provide full details of the insurance your lender would be expected to have more evidence on what happened to back up its case.
Currently of the cases that need to go as far as the Ombudsman, two thirds are being awarded in consumers favour. And even if your case isn’t awarded in your favour, there is no penalty for losing, it just means you don’t get the money back; so all you’ve lost is a stamp.
Help with filling in the form
To make your complaint, just contact the Ombudsman and ask it to take on your case. You can either do this via the FOS website or by calling 0845 080 1800. After contacting it, you will need to fill in and sign a copy of its complaint form to explain your complaint and enclose copies of any paperwork that backs up your case.
You can download the complaint form direct from the FOS website.
FOS Complaint Form: Download in Word or Download as a PDF
It’s quite simple to fill in, though do take care. To help I've written a guide, which takes you through filling in the form step by step. It's written in Microsoft Word so you can easily cut and paste sections of it and/or print it out and have it next to you as you're filling in the FOS form.
For help use this: Download the free FOS form help guide
(Right click to save the file)
The FOS will then send you a confirmation letter to say it will look into your case and get back to you if it needs any more information. Sometimes this will take a long time, maybe even up to a year, but don’t worry, you can then leave the matter to the FOS to resolve and it will contact you with any offers from your lender.
Where the FOS may not be able to help
As the FOS can only help with complaints about companies regulated by the FSA unfortunately this means it is not able to help with all complaints. Most people who got a loan from a bank will be covered, yet if you bought insurance from another source before Jan 05 the Ombudsman may not be able to help. The best way to find out is simply call the FOS up and ask if your lender is covered.
What to do if the Ombudsman doesn’t have jurisdiction
This does make things a little more difficult. Generally the FOS will put you in touch with another organisation, either an official one or a trade body that may be able to hear your complaint; someone like the Finance & Leasing Association or Association of British Insurers.
If this happens it makes getting a payout more difficult (though I’m still waiting for feedback on this process as this is so new), though it's still worth following it through. Please report your experiences in the PPI Non-FOS Reclaiming discussion.
When more feedback is gathered on this, any changes will go in the weekly MoneySaving email
The court route
In the circumstances where one of these trade organisations is not able to help, there is always the option of taking court action against the provider via the small claims system, on the grounds that it has misrepresented your contract (and therefore made it invalid) if it did not give you the full facts about the product or ask for all the required information.
This can actually be quicker than using the Ombudsman, but will involve costs (although you will get these back if you win) and there’s always the risk you’ll have to argue it in court. If you have good grounds, and understand the legal arguments then do consider it. The likelihood is it will force the PPI company to settle, but there are no guarantees.
At this point, it may be worth considering a lawyer or a claims handling company (see below) who operate on a no-win, no-fee basis, though most people should do it all themselves. There is a chance the Citizens Advice Bureau will help too.
For further details on how to take county court action see the going to court section of the Reclaiming Bank Charges article and if you give it a try please feedback in the successes and failures thread; as all feedback is useful.
Please feedback your experiences
This system is new and things will continue to develop over time. Please give us feedback so that we can keep our article up to date and help as many people as possible by reporting your successes and failures in our forum.
If you have tried to get a refund but have not been successful, read the Ditch Loan Insurance article as you can at least cancel your insurance, and take out a policy elsewhere if you want, saving £100s every year.
Lawyers
A growing number of law firms have recently started jumping on the bandwagon to sort through PPI cases. In general, I wouldn’t bother; simply do it yourself and don't bother using a law firm. However, if your case is more complex and/or you simply wouldn’t do it yourself, then bringing in a law firm is a reasonable last resort.
If you are going to use a lawyer make sure you fully understand the charging structure. You should NEVER PAY ANYTHING UPFRONT OR IF YOU LOSE. If the company is not open and up front about its fees (usually around 25% of what you get back) look elsewhere. You could also ask how long it has been handling PPI claims and for references from other satisfied customers, which it should be happy to do if kosher.
All claims companies must be regulated for claims management activities and will have a reference to check (e.g. CRM1234) on the Ministry of Justice database. Avoid anyone not on this list.
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