PPI Reclaiming Guide

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The UK’s biggest protection racket isn’t run by East End villains with shooters, but the genteel staff of Britain’s banks. For years they’ve been stealing £1,000s, but now the door's open to get your money back.

If you’ve got a loan, credit or store card, you urgently need to check whether they included insurance as part of it. If so, without realising, you could be paying £1,000s for potentially worthless cover.

Get your money back

Payment protection insurance isn’t a bad product. It’s designed to meet repayments for a year in the event of accident, sickness or unemployment. The problem's the way it's been flogged.

The misselling has often been systematic, banks forcing staff to sell these policies or face lower pay. You may’ve been told the insurance was compulsory... IT ISN’T! That alone counts as misselling. Plus the self-employed, unemployed, retired, those with pre-existing conditions, or who are covered elsewhere, have all commonly been flogged unnecessary policies.

You could have it without knowing...

Heavier regulation means this is less likely in the last couple of years, but many people still have loans from when the picture was a bit like this:

You want a £5,000 loan over five years. You’ve seen it advertised at a cheap 7% rate, so you call up...

You: “I’d like a £5,000 loan over 5 years please.”
Bank: “I presume you’ve seen our competitive interest rates.”
You: “Yes, can you give me a quote please.”
Bank: “Sure, our fully protected loan is £125 a month.”

Now most people would find it virtually impossible to mentally calculate how much the monthly repayments should be, so £125 sounds fine.

It’s a brilliant hustle. The answer contained two little words that make ‘em a fortune - “fully protected”. They mean you’re also being flogged expensive insurance.

Actually the cost of the loan at 7% should be £100 a month, the remaining £25 is to pay for the insurance. That means if you’d just got the loan you’d have repaid the £5,000 borrowed plus £950 in interest.

Yet the insurance adds £1,500 over the life of the loan; that's MORE than the interest cost and it's almost pure profit for the bank!

Many people have this cover which is unnecessary. And even those for whom it is necessary are probably paying four times more than you need to, if you got it through your lender.

The PPI industry has never been in so much trouble

Over the past few years there's been activity from many of the key financial organiations. Find out more

• Regulation
  Since 2006, the financial regulator, the FSA, has been fining PPI companies left, right, and centre, for “not treating customers fairly”. Then in Aug 2010 it set out a list of rules providers must follow to proactively find, and compensate, consumers that have been missold a policy.
  Yet in Oct 2010 the banking trade body, the British Bankers' Association (BBA) decided to take legal action against these plans and the Lloyds group decided to hold all complaints during the process. The FSA could now take action against banks that don't follow its guidelines.
  Additionally, the Competition Commission has investigated the market and made a number of demands on lenders, including banning sales within a week of selling a credit card or loan and totally banning single premium polices.
• Complaints
  The Financial Ombudsman (FOS) has complained to the regulator that it thinks lenders are "deliberately trying to obstruct the Ombudsman process". It thinks some lenders reject ALL consumers' attempts to reclaim.
  In Sep 2009, for the first time, it released details on company-by-company complaints data. Some big name lenders (Black Horse, Capital One, Egg, Lloyds TSB, Northern Rock, RBS, Barclays and MBNA) all had over 90% of insurance (primarily PPI) complaints found in consumers' favour at the ombudsman.
  Things have not been much better since. During the first half of 2010 81% of cases dealt with by the Ombudsman were decided in the consumer's favour.

Read More

So if you’ve got a case, write and complain but ASSUME you'll be rejected. You may even be put on hold, but no matter what your bank says don't bat an eye and just keep going to the Ombudsman.

To reclaim, you’ll need to write up to three letters (there are templates for all of them here) the last being to the Ombudsman, though there's a chance you could get a payout sooner.

As all of this is free, the worst case scenario is you lose the cost of three stamps.