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What is PPI?

What is PPI? PPI, or payment protection insurance, became one of the most notorious financial products in recent years due to the PPI miss-selling scandal.

What is PPI?

PPI, or payment protection insurance, was one of the most notorious financial products, thanks to the PPI mis-selling scandal. But what is PPI and what happened as a result of the scandal?

The deadline for claiming PPI compensation passed on 29 August 2019. This means that for most people if you feel you were miss-sold PPI, unfortunately you can't claim any longer.

There are some circumstances where you can still claim, which will be explained further on.

What is PPI?

While it’s more than likely you heard the term PPI bandied about on the news and cold callers claiming to be able to save you money, many might not have fully understood what PPI was.

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 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 would I have known if I had PPI?

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

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

It was advised that people check the original paperwork given at the time of the loan being taken.

It was possible that it was even itemised on past statements, although it was not always referred to as PPI.

What was offered if you had PPI?

The first step of reclaiming PPI was all about getting all your documentation together. Making sure that there was a paper trail copies of the original loan agreement, any statements, and any correspondence between you and your financial services provider about PPI.

Next step was to contact the financial service company who sold you the PPI in the first place, usually a bank.

There was a template for letters available online, but the main things you needed to include were:

  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 thought the PPI was mis-sold, so if you had 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 happened if the bank ignored you?

If you financial provider didn't respond to your claim, offers you a settlement you disagreed with, or denied your claim for any other reason, you could 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.

Was 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 referred to those cases where mis-selling of PPI occurred. Luckily the process of claiming PPI was easy thanks to the High Court ruling.

Claims companies

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

While this was useful and made the process a bit easier by keeping you away from the paperwork, it cost a lot of money.

While most claims companies only charged you a percentage of any compensation due, the compensation figures were 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 could do yourself for free.

Making a claim for PPI

The PPI deadline passed in 2019, however, for those who have exceptional circumstances they may still be able to apply.

According to The Financial Conduct Authority (FSCS) even though the deadline has passed the deadline applies to claims against companies that are trading, "FSCS compensates when financial firms have failed."

They will still accept eligible PPI claims after this date.

They state "the August 2019 deadline only applies to complaints against live firms and complaints that subsequently go through the Financial Ombudsman Service."

Banks will also review claims based on a case-by-case basis, for which it's not exactly defined. But could possibly include those who were seriously ill and couldn't to file a reclaim before the deadline.

There's still a possibility of taking your claim to court through a smalls claim court, but there will be no way knowing that you'll be successful.

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