Posted: 3rd February 2017
A few years back when my spouse and I were contemplating moving to a bigger house we turned to a bank for a mortgage loan. The bank official mentioned about an insurance but did not divulge much information about it. Years later, I met a friend who had just reclaimed thousands of pounds in PPI compensation and as the conversation progressed I realised I too might have been a victim of the mis-selling scandal.
My immediate response like most of us was to research on the internet. The amount of information available on the subject online was overwhelming. After successfully claiming back thousands of pounds myself I am now in a position to guide you through the entire process.
What is PPI?
PPI stands for payment protection insurance. As the name suggests, this insurance covered borrowers who were unable to repay their loans due to a change in income caused by unemployment, injuries, illness or death. It was sold alongside loans of many types such as credit cards, store cards, cash loans, mortgages etc.
PPI has been in the news for a long time and not for the right reasons. The statistics are staggering, with millions of people being potentially affected by this scandal and banks setting aside billions of pounds for compensation. If you have borrowed money from financial institutions in the last decade, then chances are high that you too could have been mis-sold a PPI policy just like I was. I remember feeling anger and confusion when I realised that I was mis-sold PPI.
Why was PPI mis-sold by banks?
PPI was meant to be a policy purchased at the sole discretion of the consumer. But unlike most of the insurances which offered cover at lower costs, PPI was overly expensive and hence more profitable for a bank. The premium often increased the loan amount by 20% with some going over 50%.
After that, because it was so profitable for banks, bank employees were pushed to sell more and more PPI policies to customers. Incentives were given to those who sold the most policies. Many bank employees testified as being under immense pressure to deliver and those who failed to sell the policy were put on performance review. This resulted in employees resorting to hard selling tactics and often using unfair means to make a sale. Many exploited the fear of their customers by making them think of the consequences of not being able to repay their loans.
How can someone spot mis-sold PPI?
If you are expecting to receive a confession letter from the bank, then you are going to be disappointed as I found out to my annoyance. Unless you hire a claims company, you will have to do a lot of investigation and gather enough evidence to convince the bank that you were indeed mis-sold the policy. My research revealed three ways how this insurance was mis-sold;
- The PPI came with terms and conditions or a set of requirements that had to be fulfilled so that a borrower could claim for compensation. For example, the insurance does not cover individuals that were unemployed, self employed, retired or suffering from an illness at the time of purchasing the policy. So if you fell into any of these categories and had a PPI policy then it should not have been sold to you in the first place.
- PPI was sold to one of my friends without his knowledge. It was only when he checked his bank statements he realised that he was making payments for a PPI policy the entire time.
- I have also heard of occasions where a salesperson deceived the borrowers into buying this insurance by providing them false information. They were told that this policy is compulsory or that buying it will increase their chances of being granted the loan.
How could someone claim?
If you believe there is a chance that you have been mis-sold PPI, then there are two things you can do to make a claim. You can either file for a claim yourself or hire the services of a claim management company. While both have their own benefits the claimant must make a well-informed decision. When I tried to make a PPI claim myself I found that the entire process was tedious and time consuming. Banks are not in any hurry to pay up the compensation amount and therefore try to stall as much as possible hoping that a claimant might lose hope or just get bored by the process and give up. It’s here that I found that hiring a claim management company can save all the troubles of the lengthy paperwork and follow ups required to make a successful claim.
Also, When I first applied for a PPI claim the refund amount the bank was willing to offer was much lower even according to my estimates. Then I read a report which stated that as many as 2.5 million PPI claims were undervalued and had to be put up for re-investigation. It was then that I decided to hire a claims company to assist me in determining the actual amount I was owed and to file a claim on my behalf.
What is a PPI claims company?
A claims management company handles the entire process of filing a claim on behalf of its client. A claims company that specialises in PPI claims can be referred to as a PPI claims company. iSmart have operated in the PPI claims industry for over 10 years. Because of their standing in the industry they are only required to submit a name, date of birth and address. Once the banks have this information they’re able to access their database and determine if any PPI was added onto any finance that customer may have taken out. They don’t need account numbers which is a major benefit if you no longer have your paperwork and the check is COMPELTELY FREE.
Who was the biggest mis-seller of PPI?
Lloyds bank were responsible for the largest number of mis-sold PPI policies. According to reports, since 2001 as many as 34 million PPI policies could have been mis-sold. These policies have been estimated at £50bn. Lloyds banking group is responsible for selling approximately 40% of the policies which accounts for £20 bn.
What is the Financial Ombudsman?
The Financial Ombudsman is a body set up by the government. It is responsible for solving disputes between financial organisations and consumers. The organisations within the purview of the FOS are insurance companies, investment firms, banks, finance companies, money transfer operators and financial advisers. The Financial Ombudsman intervenes only after the consumer has unsuccessfully tried to resolve the dispute with the concerned financial organisation.
What does a PPI claims company do?
Many people are reluctant to file a claim through a claims company and I believe a major reason for that is a lack of awareness about what a claims company does.
A PPI claims company works on behalf of the customer not the bank and firstly determines if PPI has been mis-sold. For those who have borrowed loans on multiple occasions, the number of policies is taken into consideration. They ensure that they have all the information they may possibly require in the process of making the claim.
A PPI request is then raised with the lender and they are given 40 days to return with all relevant information they have on their client. If the banks respond by saying ‘No PPI found’ then it is possible that the PPI policy has been cancelled within a short duration of the purchase. In such cases it is certain that the customer has not made any payments for PPI and hence is not entitled to any compensation. If the claims company does not receive a response from the bank, then the issue is raised with the Financial Ombudsman Service (FOS).
How can I make a claim myself?
If you are certain that you have valid grounds to make a claim, you are probably wondering about what is involved in the actual process of making a claim!
If you intend to do it yourself then you should follow the steps given below:
- Search for all the documents which show that you have made payments for the policy. Make several copies of those documents.
- Various templates of a complaint letter are available with the banks and on websites. Using those templates you can write a complaint letter to the financial institutions which granted you the loan.
- Determine the amount of refund that you are entitled to claim. The refund amount should include all PPI payments made by you along with a compensation set at 8% of the refund amount.
- If you do not get a response from the bank or find their offer to be unfair then you should escalate the matter to the Financial Ombudsman Service.
Why is it beneficial to claim using a PPI claims company?
There is a lot of information available on the internet which will make you believe that filing a claim yourself is more beneficial and that can be true but not always. The paperwork required by the banks left me tired and perplexed. It is worth noting that few cases can be more complex than the rest as calculations of the refund amount can be quite tricky. It involves many variables such as the duration for which the loan was held, premium payments made and the statutory compensation. There have been instances of banks undervaluing the refund amount thus adding to the hassles of the claimant.
Another advantage of a PPI claims company is that most have adopted a ‘No-Win-No-Fee’ strategy. If the client is not awarded with compensation, then they are not obligated to pay fees to the claims company. If you are extremely busy then a claims company can save you a lot of time.
The financial Ombudsman cannot intervene in cases which are prior to 2005. In such matters the client will be required to present his case before a judicial court. This process can be handled properly by a professional claim company.
In my opinion the fees charged by the claims company is worth paying especially in my case as it saved me a lot of time and effort and most importantly got me the compensation amount I deserved. I would highly recommend iSmart.