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What is PPI?

Written by Tom Martin, Content editor

3 September 2018

Find out what PPI is, how it was mis-sold and how you can go about reclaiming your PPI money

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PPI, or payment protection insurance, has become one of the most notorious financial products in recent years thanks to the PPI mis-selling scandal, but what is PPI and how do you know if you have it?

What is PPI?

While it’s more than likely you’ve heard the term PPI bandied about on the news and cold callers claiming to be able to save you money, it’s important to understand what PPI is.

Payment Protection Insurance (PPI) was a form of insurance sold by companies when they give you a loan. The loan could be anything from an unsecured cash loan to a credit card, but the principle is the same.

PPI was sold as a way to ensure you were able to keep making your loan repayments in the event of a change in your income as a result of you losing you job or illness for example.

While that may sound reasonable enough the way in which payment protection was sold to people has led to a mis-selling scandal, court rulings, and PPI compensation claims running into the millions.

How was PPI mis-sold?

PPI was often sold to people who would never be eligible to claim, to those who were covered through other means, and often without the full knowledge of those being sold the product.

For example, until recently if you went to a bank to take out a loan, credit card or car finance deal, PPI was often bundled into the loan. When it was included it was often poorly explained by sales staff and included in loans to the self-employed or people with pre-existing medical conditions who would never have been able to claim.

How can I tell if I have PPI?

If you remember a conversation about ‘cover’ or ensuring your repayments when you took out your loan there’s a good chance you have PPI, particularly if you took out your loan over or before 2012 when PPI was still being sold.

Even if you don’t remember such a conversation you may still have PPI on your loan or credit card as PPI was often sold without people being aware of it.

The best way to check is to look at the original paperwork given to you at the time of the loan being taken. If you don’t have the paperwork you can simply contact your credit provider and ask them whether your loan or credit card has or had PPI on it or request a copy of your original credit agreement.

You may also be able to see it itemised on past statements, although it might not always be referred to as PPI. Look out for any extra charge on your monthly statements and phrases like ‘protection cover’.

What to watch out for

If you contact your financial services provider and discover you have PPI you should be careful about how you make your claim.

While your financial services provider may offer you a compensation figure and claims management companies may contact you, it is perfectly possible for you to claim back the full amount you’re entitled to yourself without losing any money to third parties.

How to reclaim PPI

The first step of reclaiming PPI is all about getting all your documentation together. Make sure you collect and take copies of the original loan agreement, any statements you have, and any correspondence between you and your financial services provider about PPI.

Next step is to contact the financial service company who sold you the PPI in the first place, usually a bank, and formerly start your compensation request.

There are template letters available online but the main things you need to include are:

  1. Any reference number or the name of a complaints manager assigned to your case

  2. Your credit reference number and your PPI number if you have one

  3. When the PPI policy was taken out

  4. What financial product it was tied to

  5. Why you think the PPI was mis-sold, so if you have a pre-existing condition or if you weren’t made aware of the PPI

  6. Your full contact details and the details of anyone else involved in the claim

What if my bank ignores me?

If you financial provider doesn’t respond to your claim, offers you a settlement you disagree with, or denies your claim for any other reason you can still escalate your claim by taking it to the Financial Ombudsman Service.

Since the High Court ruling your bank should respond quickly, but if you don’t get a response within six weeks you can also go to the Financial Ombudsman.

The Financial Ombudsman Service is an independent organisation that will evaluate your claim and make a ruling that the financial service provider must adhere to.

Is everyone sold PPI entitled to a refund?

No. One of the important things to remember about PPI is that it can be a useful product, and many people knowingly took it out.

PPI compensation only refers to those cases where mis-selling of PPI occurred. Luckily the process of claiming PPI is now easier than ever thanks to the High Court ruling.

Don’t lose out with claims companies

Despite the process of claiming back PPI to be relatively easy there are a huge number of claims companies who will offer to handle your claim for you.

While this can be useful and makes the process a bit easier by keeping you away from the paperwork it costs a lot of money.

While most claims companies only charge you a percentage of any compensation due the compensation figures are often thousands of pounds. So for example, if you were awarded four thousand pounds in compensation some claims companies would take up to one thousand pounds to cover their fees.

That’s a huge amount of money for something you can do yourself for free.