Can I Get A PPI Refund If I Owe The Bank Money?

Posted: 3rd April 2018 & filed under PPI

Financial Mis-selling: A Glimpse

Ever since money was invented as a medium of trade, frauds and scams have become commonplace. Over the years, financial crime has become smarter but also more dangerous.

Mis-selling is quite identical to stealing, except that it is a lot more sophisticated. In simpler terms, financial mis-selling is the practice of selling financial products to customers for whom it may not be of much value.

It deals with all sorts of manipulative techniques which are used to mask off selective aspects and selling the product without letting the buyer know the complete picture. Financial mis-selling has majorly dug into areas such as investment, pension and insurance, and other vulnerable practices.

Payment Protection Insurance (PPI): What does it mean?

Payment Protection Insurance (PPI) is an insurance policy that enables the customer to be financially covered by the provider if they are unable to earn their income due to unforeseen circumstances.

The lender is obliged to cover the customers on the event of their sudden death, severe mental or physical illness, serious accident, unemployment or any other circumstance that disables the buyer to earn their regular income.

PPI is also commonly known as credit insurance, loan repayment insurance or credit repayment insurance.

The policy has received these names due to its regular pairing with loans and credit advances. The policy is often sold to the customer by their concerned commercial banks and/or card companies while borrowing a loan or credit.

The policy usually covers payments for a specific period of time (mostly 12 months). In order to pay off loans and mortgages, the entire monthly payment is sanctioned, whereas the minimum monthly amount is paid in the case of credit cards.

The customer would be given the financial cover for that period, following which they may have to resort to alternative means.

However, there are certain policies that repay the entire debt amount in case the buyer is not able to return to work.

Is PPI The Same As Income Protection Insurance?

There have been several cases where PPI has been confused with Income Protection Insurance. Though both the policies are concerned with paying the buyer who is unable to work, there is a thin line between the two.

It is important to note that while PPI deals with covering a particular debt or any other payouts taken care of by the lender, Income Protection Insurance gives the buyer a tax-free portion of their income if they are not able to work because of an illness or injury.

Also, PPI generally pays out for the period of 12 months, while Income Protection Insurance can be issued for the customer’s entire life.

What Are PPI Exclusions?

PPI cannot be bought by anyone who is willing to buy the policy. There are certain categories of people who are not entitled to avail the benefits of the policy.

These categories are commonly known as PPI exclusions. Though all these exclusions may not hold true for every policy sold (always read the policy documents carefully), these are some of the common PPI exclusions:

  • Students and People Attending Higher Education – If an individual is a student or is attending higher education, their employment cannot be classified as a full-time employment. There have been several students who work along with their studies, but PPI is not sold to customers engaged in a part-time employment.
  • Self-employed – PPI is also not suitable for an individual of they are self-employed or have a business of their own. So, PPI can only be issued to people working for a separate organisation on a full-time basis.
  • Part-time Workers – Though there is no clear distinction between part-time and full-time workers, full time workers are generally working at least for 35 hours in a week. Anything lesser than this or on a convenience basis can be considered as a part-time job. Part-time workers will not be able to reap the benefits of the PPI policy or make a claim for for it.
  • Contract Workers - PPI is also not suitable for people working on a contract basis. As these individuals work only when they are called for and are not regular in their work hours, they are also classified as part-time workers.
  • Existing Medical Conditions – The lenders would not compensate for an illness you already had at the time of purchasing the PPI policy. PPI is only meant for covering the customers if they are not able to work due to sudden adverse medical conditions. If a borrower makes a claim for not being able to work due to an existing illness, the claim is very likely to be rejected by the authorities.
  • Mental Health Problems – If a customer is suffering from a mental illness or has a record of past mental illnesses, they cannot be sold a PPI policy.
  • Joint Borrowers – If there are two working individuals applying jointly for a loan, it will be dependent on two working adults and the repayments would be taken care of accordingly. However, a PPI policy cannot be issued to both the applicants individually. It is usually only issued to the first named applicant for the concerned loan or credit.
  • Age Limit – Though there is no specific age after which the buyer cannot be covered by the policy, the policy can only be sold to those who are below a certain age. Being different for every buyer, they can be covered by the policy only till they reach their specified age.

PPI: How Did The Mis-selling Start?

In 1960s when PPI policy had just been introduced in the market, it was considered to be a great insurance and investment option. Due to its high profitability the banking industry gradually started selling this policy.

As they sold PPI to the customers, they started realising that it is a high-profit financial product. The mere commission that they were getting as lenders was huge. They started viewing PPI as a financial product which could reap huge profits for them and naturally they were tempted to make the most of it.

This greed made these financial institutions mis-sell PPI. As they were well aware of the fact that the policy would help them make more money, they started thinking of ways to manipulate their customers to buy a PPI policy.

This was the conception of the infamous PPI scandal.

The banks and card companies resorted to several unethical ways of selling the policy. Some of them are mentioned as follows:

  • The lenders sold the policy along with a loan or credit borrowed by the customers. Here, the buyer is completely unaware about their purchase of the policy.
  • The lenders were aware about the PPI policy being sold to them, but certain clauses of the policy were deliberately kept hidden. The most common hidden clauses included the payment of commission.
  • The customers were explained the policy, but in a way that normal aspects were highlighted and the other were totally suppressed. This practise was used in order to falsely glorify the picture of the policy to the people who don’t really need it.

The banks continued selling and mis-selling PPI policies to the people of the UK. The innocent buyers had no clue that they were making payments for a policy whose benefits they could not gain any advantage from.

On the other hand, the ignorant buyers never really cared about the important clauses as far as their purpose of being covered was concerned. This is exactly what the scammers took advantage of.

They targeted customers who they believed were either innocent or ignorant and mis-sold the policy to them. In this way, they were able to earn a lot of money in the guise of commission for years without the customers even knowing where their money was going.

This practise continued for years and was finally exposed as an act of fraud.

How The PPI Scandal Unfolded

It is believed that financial institutions have been mis-selling the PPI policy since 1990s. For quite some time, PPI was considered to be one of the most beneficial insurance policies to invest money.

However, greed took over their intentions and lenders started mis-selling the policy on a large scale since they realised that it could earn them handsome profits. The scam carried on for several years until it was exposed in the 2000s. Until then, the commercial banks and card companies kept misleading consumers into buying the policy through unethical ways.

In the mid-2000s, certain customers realised that there was a particular amount being debited from their bank accounts. The word slowly got around and soon media was investigating into the matter.

Be it the press or the victims of this mis-selling scandal, everybody was busy looking for the culprits. After checking their loan agreements and their documents regarding borrowed credit, they were convinced that it was the commercial banks that sold them the policy without their knowledge.

However, the affected individuals had no idea about what they should do next. It was devastating for them to know that a certain amount was being deducted from their personal accounts and they had no information regarding why.

In 2004, the Guardian made a revelation stating that several banks were returning hardly 15% of the customers’ PPI income to the claimants. Therefore, this made PPI a much more lucrative option as compared to other insurances such as home or car loans.

Finally, in the year of 2005, Citizens Advice exerted greater pressure on lenders by launching an investigation into the matter. This investigation labelled PPI as a ‘protection racket.’ All the banks and card companies were now fighting a lost battle.

The Charge Sheet Against PPI

After a detailed investigation into the matter of PPI mis-selling, a fourfold charge sheet was made against the policy, which made the following claims:

  • PPI was regarded as an expensive policy, with premiums adding 20% to the value of the loan sanctioned. There have also been cases where the premium has been as huge as 50%.
  • PPI was now officially a ‘mis-sold’ policy, as it was either sold without the knowledge of the customers, as an ‘essential’ along with a loan or sold to people who are not entitled to buy the policy (PPI exclusions).
  • PPI was also perceived as an inefficient policy due to the lengthy delays and complicated procedures of making rightful claims.

PPI: The Role Of Financial Services Authority (FSA)

Soon after the scandal was exposed, it started getting a lot of media attention. There were new claimants everyday who realised that they had been wrongly sold the policy.

As the number of complaints started increasing exponentially and the compensation amount started piling up, the FSA officially made a declaration stating that the PPI issues were of utmost important in 2005.

This was the same year when the FSA took over the charge of regulating the general insurance agency. At the end of the year, it also wrote to the heads of all the banks of Britain regarding the issue of PPI mis-selling.

In 2006, the FSA started imposing fines on the offenders that were found guilty of mis-selling the policy. This started with a fine of £56,000 which was imposed on the Regency Mortgage Corporation. The firm was reportedly accused of selling PPI to the ‘right-to-buy’ mortgage customers who would not have been able to claim their compensation. The company was also accused of selling the policy to customers already having insurance.

There were many such cases that followed. Liverpool Victoria Banking Services was fined £860,000 in 2008 for secretly adding the policy into the deal of customers who had only asked for a simple loan.

Alliance and Leicester was fined around £7 million. FSA came to the conclusion that their staff was being told to put pressure on the customers when they were questioned about the inclusion of PPI in their quotation.

Also, the FSA banned the most disastrous variation of this insurance in 2009 – Single Premium. This policy was often sold to mortgage-buyers and was added to their total loan in the beginning itself. In 2011, the FSA came up with a new set of rules for PPI sales, which made the issuing of policy clearer. The regulations stated that:

  • The customers must be given a personalised quote that deals with all the details regarding costs and covers
  • PPI could not be issued to the customers at least for seven days after the loan was sanctioned
  • It was mandatory for the lenders to inform the customers and notify them in writing about the fact that PPI is an optional policy
  • PPI sellers had to give an account of the number of customers that have been satisfied with their services and were successful in claiming their respective policies.

All these clauses made it safer for the customers to get a loan or credit without having the fear of PPI being unknowingly sold to them.

PPI: The Role of Ombudsman

As the number of PPI claims and compensations increased, every other bank and card company was flooded with new complaints pouring in every single day.

Due to this mess, the lenders started ignoring the complaints. If a mis-sold buyer needs to apply for a compensation, all they need to do is call their lender, give them the policy details and get their complaint confirmed.

However, there were several lenders who refused to cooperate with their customers. Here, the FOS came into the picture.

When many complaints were ignored by the lenders, mis-sold buyers started approaching the FOS. It was their last resort to settle their claims. The duty of the Ombudsman is to settle the dispute/misunderstanding between the customers and their lenders, and make sure that every customer is dealt with justice.

If a customer has been neglected or denied their compensation by the lenders, they can fill an online form and submit it to the Ombudsman.

The Ombudsman would then ask for the related documents and would also get in touch with the concerned lender in order to get a clearer picture of the situation. After detailed analysis of the case, either the lender would be penalised and asked to pay the compensation, or if the lender wins, the compensation would be deemed as invalid.

Over the past few years, the number of complaints coming to the Ombudsman has only been rising. This situation can be compared to an overflowing tank of water. In spite of the financial institutions working on hundreds of cases every week, there is still an equal number of cases that need to be resolved.

For years at a stretch, the FOS has made declarations, claiming that out of all the cases coming to them in a year, more than half the cases are regarding PPI.

In 2014, the FOS reported to have been receiving around 1,000 new PPI complaints every single day. The situation has now gone so ugly that the regulatory body is thinking of increasing the number of employees for making sure that the PPI cases are resolved as soon as possible.

Can I Get A PPI Refund If I Owe The Bank Money?

A customer generally purchases a PPI policy from a bank they already have an account with. The policy is generally attached to a loan or a credit card sanctioned by the bank.

However, one question has always popped up in the minds of mis-sold customers. They always wonder if they would still receive their PPI refund if they owe a debt to their banks. You can definitely claim compensation from a bank you owe money to, but whether you will be paid the amount or not depends on the nature of your debt.

A customer can always make a claim for compensation from a bank to which they are actively making repayments. However, if there is a situation where the claim is upheld before the money being sent, the bank would check the customer’s account and its status.

The refund money would be paid to them separately only if none of their bank accounts are in arrears. If money is overdue in any of their accounts, the compensation would go into paying off the concerned debt before it is paid to them.

A customer should always make this check before claiming the refund money separately from their banks.

However, if all the accounts are clear, customers can get the refund in spite of them owing money to the bank. The payment is generally made in the form of a cheque.

This money can then be paid into the customer’s account with the bank or into any account of their choice. The customer is free to decide what to do with their compensation amount. This refund is considered as a separate sum altogether, which may or may not be used to repay the debts, depending on the customer’s will.

Can You Receive PPI Refund Against An Account In Arrears?

The issue of mis-sold PPI is dealt separately from other issues faced by the account holder. The fact that you are struggling to pay debts may have nothing to do with you being mis-sold an insurance policy. You can make a claim for compensation to your bank even if you have an account in arrears. However, you may not directly receive the money.

This is due to the Set Off rule followed by the banks. According to this rule, if your account is in arrears, the bank can use any income of yours to settle the debt and clear all the dues before you get the final cash-in-hand. In compliance to this rule, the bank would use your PPI refund amount to clear your account in arrears.

You should also note that the Set Off rule applies to all the accounts you hold in your bank, for example, the refund you are getting can be used to settle any account that is in arrears (i.e. money that is owed and should have been paid earlier). It need not be the same account you are claiming your compensation against.

There have hardly been any cases where a customer has refused the bank to clear the arrears and to hand over the compensation separately. The Set Off rule has always helped the customers to get debt-free sooner, as the amount received would have gone in paying off the debts anyway.

Can You Keep Your PPI Compensation, Being In A Debt Management Plan (DMP)?

A Debt Management Plan (DMP) is a formal agreement between a debtor and a creditor which deals with the terms and conditions of repayment. It may deal with the matter of easy instalments or the period of time within which a debt has to be paid off.

A DMP generally involves the creditor in accepting reduced payments from the debtor. If you are in a DMP, it is safe to assume that your creditors have agreed to accept reduced payments for your debt.

If you are in a DMP, you can still keep your PPI refund amount with you, unless your account is in arrears. There have been cases where in spite of a customer being in a DMP, their accounts were still running in arrears.

In such cases, any amount you receive would go in settling off your debts before you receive your compensation. If the arrears are greater than your compensation amount, you may not receive any money at all. You being in a DMP cannot help this situation if your bank debts are overdue.

It has often been argued by customers that such a practise is unfair. They have said that they may have other important debts to settle which can be taken care of by the compensation they receive.

However, the bank cannot be penalised for agreeing to have reduced payments with you. A DMP generally lasts for a long time, which may get troublesome for a customer after a point of time. In fact, claiming PPI refund against a debt you owe under DMP can help you reduce the plan duration significantly.

However, if you are no more in a DMP and you have settled your debt before claiming PPI refund, you are entitled to the entire amount and are free to use it wherever you wish. However, if you have settled your plan early with a lump sum payment, the bank may still argue before giving you the money, as the remainder of your debt would still exist.

The banks would ask you to clear your dues according to their Set Off rule. This still doesn’t mean that you won’t get the money.

You can fight this in your favour, provided you have an acceptance of your statement offer in written, clearly stating that the debt has been paid off in a lump sum and the remainder amount is to be written-off. This would make you absolutely debt-free, thus invalidating the Set Off rule.

In such a situation, you will get your refund in full at your disposal.

Will You Receive PPI Compensation If You Are Statute-Barred?

If you borrow funds from a creditor and fail to repay them for a certain (generally long) period of time, you can no longer be forced by the creditor to make the repayment. After crossing this time duration, you are called Statute-Barred.

Generally, a debtor is considered to be Statute-Barred if they fail to repay the creditors for more than six years. Once this margin is crossed, no creditor can legally force a debtor to pay them their dues.

It is common to believe that if you are Statute-Barred, all of the PPI compensation you receive will be awarded to you. However, that is not the case. Even if you are Statute-Barred, the Set Off rule would still apply to your refund and the amount would be used in paying off the debt.

This is because the debt is never written off.

It still exists, and the creditor can therefore use any funds that you owe in order to settle their debts, PPI refund being one of them. You should always keep in mind that your debts are never written off even after you being Statute-Barred.

It has always been an unwise decision by the customers to make claims against a Statute-Barred debt. The claim may also be considered as an acknowledgement of the debt, making it enforceable again. So, if you’re expecting to receive your compensation amount in full after being Statute-Barred, that would definitely not happen.

PPI Mis-selling Scandal: Major Offenders

The majority of the high-street banks and card companies have been offenders of PPI. After the scandal was unfolded and as the victims started realising that they were mis-sold, almost every major banking company was named and shamed for playing this financially notorious scam.

We’ll discuss below two of the major offenders of the PPI scandal, which are also amongst the most trusted banks in the country. That’s Barclays and Lloyds.

What Was The Role Of Barclays In Mis-selling PPI?

Barclays has been one of the topmost offenders of the infamous PPI mis-selling scandal. After the policy started getting popular in the early 2000s, the banking giant thought of taking undue advantage of its power and status. They continued to mis-sell the policy for years without anyone getting a whiff of what they were up to.

Only after the scam unfolded, it was revealed that they had robbed billions off their customers by mis-selling PPI. The damage is so deep that there are complaints which are still pouring in against Barclays and their card-selling branch, Barclaycard.

For years, the bank has been setting aside huge funds only for the purpose of settling PPI claims. In July 2017, the bank was reported to set aside another £700 million to take care of the growing claims.

In spite of Barclays making a pre-tax profit of £2.3 billion in the first six months of the year itself, they have stated that majority of these funds regularly go into settling PPI cases.

Jes Staley, the Chief Executive of Barclays has made a statement saying that they are now in a much better position than they were earlier, and would want to pay more attention to other important issues regarding the development of the company as a whole. The PPI issue does serve as a major distraction, but the bank seems to be coping well with the same.

Lloyds: The Most Notorious Offender Of PPI?

Out of all the commercial banks and card companies involved in the PPI mis-selling scandal, Lloyds Banking Group has perhaps proven to be the worst in the public’s eyes. The banking group has been reported to have caused the maximum damage by wrongly selling the policy to millions of customers. Lloyds has also been reported as the first bank to start with the practice of mis-selling.

The bank recently reported a 4% rise in their pre-tax profit in the first half of the year, valuing £2.5 billion. Along with this, the bank has also declared setting aside £350 million in the first quarter of the year and £700 million in the second quarter, making them set aside another £1.1 billion only for the purpose of settling PPI claims.

In spite of working as hard as possible to solve the claim issues, the bank has still been receiving an average of 9,000 complaints every week. This has handicapped the growth of the institution, as a major chunk of their profits has been going into taking care of the PPI issues.

Lloyds has also been accused of training their employees to dodge questions regarding PPI. On being asked, the employees have often argued instead of accepting the fact that they have committed a huge blunder.

This attitude of the bank has worsened the scenario. Mr. Antonio Horta-Osorio, the Chief Executive of Lloyds has said that there will always be “redress costs” and there will be mistakes that will be made.

However, in spite of setting out a huge PPI provision, the bank is still earning decent profits, as we mentioned earlier. Horta-Osorio also states that the bank has been expanding in the area of consumer lending, comprising of facets like credit cards, personal loans and car finance at a rate of less than 4% over the past six years.

Horta-Osorio is now focused on reducing the bank’s cost-income ratio, which fell to 45.8% from 47.8%. This clearly shows that the bank has been focusing on other important issues and making handsome profits in spite of the blunder it committed for years.

What Are The Consequences Of The PPI Deadline?

The infamous PPI scam has had lasting repercussions. The filing of claims started more than a decade ago, and there are still new cases coming up every other day.

Almost every single day, people are realising that they have been mis-sold the policy and are filing complaints against the lenders with their respective banks and card-companies. For years, various financial institutions have been dealing with the issue of miss-sold PPI and paying back the refund in billions.

The Financial Conduct Authority (FCA) finally decided to put an end to this two-way suffering. It decided to have a deadline for making claims regarding mis-sold PPI, which was originally set in mid-2018.

However, there was a huge uproar against the decision as there were thousands of unsolved and undiscovered cases, which made them shift the deadline to August 2019.

Also, the FCA has asked the banks to use as many platforms as possible in spreading awareness about the issue of mis-sold PPI. This is being done to make sure that more and more people file their complaints before the deadline.

The PPI deadline has had different effects on the customers and lenders. The customers are still in resentment as there may be cases which are yet undiscovered. Though the awareness drive by the FCA would help maximum customers to discover the fact that they were mis-sold, the deadline is still not taken positively by majority of the customers.

On the other hand, it is welcomed by the financial institutions with open arms. They have been seeing the deadline as an end to years of financial suffering. For several years, the banks and card companies have been dedicating most of their time in solving PPI cases. The volume of frequency of cases has been increasing exponentially and there are new cases being registered today as well.

Several banks have said that they are getting diverted from more important issues and haven’t been able to concentrate on the areas of development. Most of their profits are eaten away while repaying the mis-sold buyers. A deadline for claiming PPI would end this issue forever.

However, the banks and card companies have severely suffered due to the delay in the deadline. Due to the gap of more than a year and increased awareness about the matter, the number of complaints has further increased.

Now, the customers want to rush in order to settle their claims before the deadline, and FCA’s order of spreading awareness further increases the frequency of complaints.

After the declaration of delay, certain banks have been receiving thousands of new claims every week. This is what has led the banks to set aside extra funds just to look after the issue of mis-sold PPI.

This scenario is expected to continue for another year till the deadline finally approaches.

In spite of the issues faced by the banks, the delay has been lauded as positive when it comes to the economic growth of the country. Several experts have stated that an increase in the number of claims and compensations would increase the disposable income of individuals, therefore increasing the total disposable income in the economy.

Though this might not be a highly noticeable change, it is still appreciated by analysts, looking at the recent disappointments regarding UK’s economy.

With questions popping up like the ones we’ve covered, you should get a free PPI check as soon as possible just to make see if you’re eligible. If there are any questions, feel free to contact us at iSmart or seek further advice from the FOS or legal companies. Don’t miss out!

How Far Back Can I Claim PPI?

Posted: 22nd March 2018 & filed under PPI

Payment Protection Insurance (PPI) policy is widely popular for being sold alongside mortgages, credit cards and loans since 1990s. The sole purpose of the policy is to cover payments on loans if a consumer falls ill, faces unemployment or passes away.

However, the PPI policy did gain profits for the banks which was the main reason behind its mis-selling. Millions of PPI policies were mis-sold to people across the country by their banks for the mere reason of gaining profits.

There are many examples of PPI mis-selling, because of which the borrower with PPI is left with a policy that is of no use to them. Especially when they go to make a claim. It was not just the victims of this scandal that suffered the consequences of mis-selling but also the banks and Financial Ombudsman Service (FOS).

Impact Of The PPI Scandal On The British Banks

Since the 17th century, people of the UK have trusted banks for keeping their money safe. In over a century, British Banks have evolved and have successfully established themselves as powerful financial institutions worldwide.

Keeping this in mind, the PPI mis-selling scandal was a complete shock for the people as they were also disappointed to discover their trusted banks had deceived them.

The customers who paid for loans, mortgages, credit cards and overdrafts noticed an additional charge for PPI added to their total credit amount. Banks had been selling the PPI policy to their customers for years without verifying whether the customers are even eligible for the policy or not.

This greedy behaviour of the banks led to the widespread PPI mis-selling which became one of the biggest financial scandals the country has ever seen.

Ever since the PPI mis-selling scandal was uncovered, the British Banks have been paying out money owed for mis-selling PPI policies to their customers. Even after paying out money for the successful PPI claims, the concerning factor for these high street banks is their reputation and the loss of people’s trust in them.

Now, the banks are trying their best to pay out as much money as they can so as to regain their lost reputation and trust of the people across the country.

Should We Expect A Similar Episode In The Future?

Now that banks have broken the trust of people, they are paranoid and believe that there can be a similar situation again in the future. The way in which banks have fooled the people and mis-sold them the PPI policy was an underhanded way to take people’s money. Undoubtedly, the banks were caught and punished by the financial authorities.

Apart from the PPI mis-selling scandal, concern regarding the other financial products being mis-sold is also observed which has further made it difficult for the Banks to regain their reputation and people’s trust in them. Whether or not the Banks learnt their lessons, the Financial Conduct Authority (FCA) will be keeping an eye over them.

Impact of PPI Mis-Selling on the People of UK

For the mere reason of gaining profits, the Banks mis-sold the PPI policy to millions of people who did not require the policy or to people who would be unable to make a claim in future.

The FCA stepped in and decided that sorting out of the PPI policies was one of its priorities in 2005. By the end of the year 2005, the FCA had written to the heads of all British banks about the PPI mis-selling issue. Later in 2006, the FCA began imposing fines for the mis-selling of PPI.

In 2009, the FCA even banned one of the worst types of PPI called the ‘single premium’ which was sold to mortgage buyers and was added to their total loan amount at the start. The PPI mis-selling scandal however escalated in 2008.

As per the FCA’s records, about 53 million PPI policies had been sold out of which the Banks sold 45 million policies (total worth around £44 billion). There is no clarity on how many of these policies were mis-sold but the FCA estimates that around 3 million people were affected by the mis-selling scandal.

Impact Of PPI Scandal On The Financial Ombudsman Service (FOS)

PPI has been an attractive financial product ever since it made a debut. When it is sold to the right people under right circumstances along with right product and with the right level of understanding of costs, benefits and limitations, PPI can be extremely beneficial for both the borrower and the lender.

Nevertheless, PPI is not a simple product nor is it a single product. There are variations to it that includes,

  • Single premium (banned by FCA since 2009)
  • Credit card
  • Regular premium
  • Mortgage (MPPI)

Certainly, it is not a kind of product suitable for everyone and various exclusions and conditions dramatically narrowed its suitability. The attractiveness of the product made it easy to sell it to millions of people and many of them did not have a clear idea about the PPI policy being sold to them.

Many people after realising that they were mis-sold the PPI policy decided to file for compensation. The FOS has been receiving millions of complaints regarding PPI ever since it was first established. In FOS’s 1997 annual report, it claimed it has received about 446 complaints related to PPI.

The volume of complaints has been increasingly growing since the year 2005 and it was not until the middle of 2007 that complaints to the FOS rocketed. From 1832 new PPI complaints in 2007, the figure jumped to 10,675 in 2008.

From October 2010, when the judicial review was announced until May 2011 when it was dropped, the FOS was unable to address most of the PPI complaints. This was despite the fact that the flow of incoming complaints slowed due to banks putting a large number of cases on hold.

From April 2011 to March 2012, the FOS had to face over 150,000 new complaints and the figure more than doubled (around 400,000) during the year 2013-14. At its height, the FOS was receiving over 12,000 new PPI complaints a week. This clearly gives you an idea that the PPI complaints majorly dominated all other cases that the FOS received from across the entire spectrum of financial services.

All these factors make PPI the most discussed scandal in the UK; it is high time people start making a claim for their mis-sold PPI policy. It will surely take a lot of time for you to receive the compensation, but the patience can be totally worth it!

Reclaiming Mis-Sold PPI

If you are among the millions of people who were mis-sold the PPI policy by their banks or lenders, it is time for you to stand up for what is rightfully yours. Reclaiming PPI is a tedious process and most people avoid initiating it.

Depending on your case, it might take days, weeks, months or even years to receive the compensation amount. On the other hand, you should be eligible for making a claim in the first place. There are two main factors that can make you eligible for reclaiming PPI payments. They are:

  • If the PPI policy was sold to you without your consent or without informing you that it was optional, then you are eligible to make a claim.
  • You may have been sold PPI even though your circumstances at the time of taking it meant you would stand no chance of claiming on it later when needed.

Moreover, if one or more than one of the following conditions is applicable to you, then you are rightfully entitled to reclaim the PPI payments. These conditions are:

  • If you signed up for a PPI policy (that includes unemployment cover) when you were unemployed, self-employed or retired.
  • If you were suffering from a medical condition while taking the PPI policy and it was still sold you with complete knowledge that it could prevent you from working at some point in the future.
  • If you were older than the upper age limit for your policy.
  • If the terms of your PPI policy were shorter than the terms of your loan and it was not explained to you while taking the PPI policy, you will be left unprotected towards the end of your loan term.
  • If your lender or the bank did not explain you the terms and conditions under which you are eligible to make a claim.
  • The total cost of adding PPI to the loan amount was not explained to you or the quote you were given for the cost of the loan had PPI added to it without your consent.
  • If you were told PPI policy is compulsory.
  • If you were asked to get your PPI cover from the same provider as the loan or credit card.
  • If you felt you were being pressurised into taking a PPI policy and were unable to say no.
  • If you were not explained the procedure of cancelling your PPI policy.
  • If you were already insured with a cover that protects your repayments and were not asked about this or were told that you require a separate cover.
  • Upon checking the paperwork you find out that you have been paying for PPI cover but do not remember signing up for it then it may be the case that it was added without your consent.

One thing every mis-sold PPI victim should remember is that it is up to the PPI seller to prove that the PPI policy was completely explained to you and that you agreed to pay for it. If they are unable to prove this, there are good chances for you to make a successful claim against them.

How to check if you had PPI

As we already know, PPI policy is sold alongside loans, mortgages and credit cards. Look for references of ‘PPI’ in the original paperwork of your loan or mortgage agreements, more recent credit card statements and under the terms and conditions of each.

Information regarding the PPI policy and its payments are most prominently mentioned under the additional charges next to the repayment information.

Products names to look for

Apart from ‘PPI’ or ‘payment protection insurance’ your original paperwork may also include different names for PPI and similar products, such as:

  • Accident, sickness and unemployment insurance
  • Account cover
  • Credit insurance
  • Loan care
  • Credit protection
  • Loan insurance
  • Loan protection
  • Loan repayment insurance
  • Mortgage payment protection insurance
  • Payment cover
  • Protection plan

What to do if something in the paperwork doesn’t make sense to you

While checking for PPI on your paperwork, if you come across something or some statement that isn’t clear to you, call or write to your bank/lender of your loan or mortgage for explanation. When you ask them for this information, also enquire whether you had a PPI policy under your name or not.

After the entire PPI mis-selling scandal, banks and lenders are well aware that their customers might contact them to complaint about PPI and are well prepared to provide correct information to their customers. Contacting your banks or lenders to check whether you had PPI will not affect your relationship with them. Also, it will not affect your relationship with your banks and lenders if you move ahead and decide to file a claim.

Ask your provider if you had PPI

If you ever took a loan or had a credit product under your name but cannot find any relevant paperwork or statements, call or write to your bank or lender without hesitation. You can further enquire whether you had PPI or not.

When you call or write to your bank or lender enquiring about PPI, have the following information handy so it is easy for them to look into products under your name.

  • Your full name
  • Your address at the time you applied for the loan or mortgage
  • Details regarding the loan or mortgage (if you know any)

Most importantly, you should know that your banks or lenders wouldn’t charge you for giving you this information. Banks and lenders are well aware about the PPI scandal and are ready to help the customers that contact them.

Customers should receive a response within 40 days of contacting their banks or lenders. If your bank or lender informs you that you had PPI, it is your choice in the end to decide whether to make a claim or not.

If your bank or lender does not provide services that offer to check whether you had PPI, you can ask them to give you a copy of the original paperwork and terms and conditions related to your loan or the mortgage you took.

If your account is in an active state, this might cost you £1.

If the account has been closed or cancelled, you can make use of your provider’s ‘subject to access’ form and this might cost you £10.

This form will provide you with all the information that your banks or lenders have related to you and the financial products that you have taken in the past 6 years.

Once you have received the required paperwork and figured out that you were mis-sold the PPI policy, you can proceed to filing a claim. There are however, two ways in which you can make a claim,

  • Make a PPI claim all by yourself
  • Make a PPI claim with the help of a Claim Management Company

Making a PPI claim all by yourself

If you choose to make a PPI claim all by yourself, here are the steps that you are required to take when filing your claim.

  • Acquire all the original paperwork and details related to your loan or mortgage that states you were mis-sold the PPI policy. Make sure that you have enough copies of the paperwork in case extra copies are required in the future.
  • Once the paperwork is established, call your banks/lender or register a complaint by mail. Alternatively, you can even complete a questionnaire by the FOS and send it to your bank/lender. Attach all relevant documents to the letter that prove you were mis-sold the PPI policy and also provide an explanation for the same.
  • Banks/lenders have a time period of eight weeks to respond to your complaint letter. If you do not receive a response or decision within eight weeks, forward the complaint to the FOS.
  • After the FOS receives your complaint, they will ask you to fill out a questionnaire to decide whether you were mis-sold the PPI policy or not.
  • If you receive unsatisfactory results from the FOS, you can still challenge their judgement. Consult an official ombudsman and request a formal decision. Further, you will be entitled to a complete investigation that might take time as they may require more detailed information.

Making PPI claims with the help of Claim Management Companies

Making a successful PPI claim can be a very complex process as there is a lot of money involved. With tedious arguments with your bank/lender and a requirement of investing a lot of time, the entire process of making a claim becomes burdensome for any individual. For this purpose, there are professional claim management companies that help people make a successful claim.

Apart from getting the work done faster, there are several other benefits of setting PPI claims through claim companies. They include,

  • Specialisation

Claim companies have a team of professionals that are trained to handle the PPI claims and pledge to do their best to help the victims of mis-sold PPI scandal to get their rightful compensation amount.

However, most claim companies are specialised in several sectors such as personal injury claims, PPI claims and many more. Each department has professionals taking care of the customers. Thus, people can relax and get all their queries resolved by these experts.

  • Knowledge About the System

Making successful PPI Claims is not an easy task.

The entire procedure and the system are very complex to understand and handle. Victims are required to repeatedly contact their bank/lender and prove that they were sold PPI policy wrongly. It becomes all the more difficult for a victim to put forward their case when they do not have the required information or paperwork.

There are chances of your claim being rejected several times before you choose to approach the higher authorities.

Claim companies in such situations are beneficial as their employees are well versed with the system and the course of law that needs to be followed for making a successful claim.

  • Experience

When you handle a PPI claim by yourself, you are unlikely to be familiar with the entire procedure and the new rules and regulations in order to make a successful PPI claim.

On the other hand, claim management companies have expert individuals that have been dealing with claims for over years and making sure that their clients receive the correct compensation amount.

There is no way that these companies would work on a trial and error method and would never take chance when it comes to their customer’s money. Each employee is trained and has a clear idea of steps to take to make sure the claim is successful.

So, even though the claim management companies charge a certain commission for pursuing a claim on your behalf, they assure you that the work will be done and that you will receive what is rightfully yours.

Things to Know Before Approaching a PPI Claim Management Company

As the PPI mis-selling scandal unfolded, millions of people have been claiming for the mis-sold PPI policy. This has surely put the banks/lenders under a lot of strain, which in turn has made the process of claiming a lot slower. Hence, it gave rise to various claim management companies that help people settle their claims.

However, people should remember few things before they approach a PPI claim management company. Some of which are as follows:

  • If your complaint is not complex to handle and compensation amount can be easily acquired, then you can go about the PPI claiming process all by yourself, even though it is not completely advisable.
  • As banks have lost the case that was filed against them regarding improper handling of claims, there are chances that you may acquire the compensation amount from your bank/lender over a call.
  • Even though the claim is made successfully and the work is done comparatively faster, you are supposed to pay charges (which include certain pre-agreed percentage of your compensation amount plus VAT).
  • If you are in debt, then may be approaching a claim company is not a wise choice. There are chances that your bank/lender will use the compensation amount to reduce the debt amount. In this situation, you will not receive any cash but will have to pay the claim company instead.

Thus, even though claim management companies are a smarter and a better way for making a successful claim, you still need to be careful while choosing a claim company.

The Free-PPI-Check Process

When you hire a claim company to handle your PPI complaint, there is a particular procedure that they follow. The procedure is different for every claim company but the motto of it remains the same: make a successful PPI claim.

We at iSmart Consumer Service, give you an opportunity to find out whether you have PPI policy or not without charging you for this service since it is important for you as well as us to know on which financial products you were mis-sold the PPI policy.

Having detailed information regarding the finances on which you were mis-sold PPI policy not only increases the speed of the claim process but also cuts down the amount of work your bank/lender has to do from their end.

The process conducted by us includes the following steps:

1: We check whether you had PPI or not

Our team submits a request on your behalf to the concerned bank/lender. The bank/lender then has a time period of 40 days to respond back with detailed information on everything they hold on you.

However, we take additional 10 days to contact you as we conduct a proper check on the paperwork to see whether you had any PPI policy. Once we find out that you had PPI, we contact you immediately.

2: Confirmation of any PPI policies found

After availing our Free PPI Check service, the results will be conveyed to you via phone, text, email or letter. If you have/had a PPI policy under your name, you will be informed about it so that you can further decide whether you were mis-sold the policy or not.

3: What you wish to do next

If you feel that the PPI policy was mis-sold to you by your bank/lender, you can then decide whether you wish to make a claim all by yourself or with our help. If you feel that the PPI policy was not mis-sold to you, you can ask us to end the process. Ultimately, it is your decision on what you want to do with the information that we provide to you.

4: Asking iSmart to handle your claim

If you feel that the PPI policy was mis-sold to you by your bank/lender, you can ask us to handle your claim on your behalf. We do this process by conducting a questionnaire over a call or by sending out a blank questionnaire by post.

Furthermore, we send you paperwork to sign where you will be entering into an agreement with iSmart. If you agree with our terms and conditions and return the signed agreement, we will start your claim process using the details we have or the details you provide us with.

How Far Back Can I Claim PPI?

Millions of people that have old loans and other finance agreements under their name have had PPI attached to it. Some of these old loans go far back to the 90s which has left people wondering, “How Far back can I claim PPI?”

If you look up online or come across any news explaining about PPI reclaim, you will observe that the informer usually states a “six years” time limit for PPI claims. This means that people can reclaim PPI on loans and other finance agreements that go back up to six years. In fact, this is the time limit set by the Financial Ombudsman Service (FOS) whereby the banks and lenders are required to give any PPI claim a complete and a proper investigation.

Things start getting blurry for the loans and finance agreements (having PPI attached to it) that are made prior to this six years time limit. This certainly does not mean that the banks get to get away with this.

We at iSmart Consumer Service have come across and successfully won various cases that go far back in the 90s. Because of this reason, we can certainly tell you what we know and how we have successfully won these claims for our clients, especially when most of you thought it to be impossible to win.

The Supposedly Six Year Time Limit for PPI Claims

To start with, let’s take a look at the six-year time limit for PPI claims imposed by the FOS and what does it actually mean.

The six years is the time period up to which your bank/lender is supposed to keep your records related to all the finance agreements that you entered into with them. It is very obvious for them to keep records as long as your policy is still active.

If the policy was active until six years back but as of today has ended or terminated this is when the six years limit comes into picture. What this actually means is that your bank/lender is required to keep records of your finance agreements up to six years from the date of completion or termination.

Please note that the time limit is not imposed from the time you take out the policy but from the point you stop making payments for it, as most people mistakenly believe it to be.

If the policy is still active (regardless of you taking it out two months ago or 20 years ago), your bank/lender will have the records right from the date you initiated your policy.

When any of our clients approach us with such a case, we explain to them the same thing that we have outlined above. If a situation arises where the bank/lender has misplaced or lost some of the required important documents, we ask them to do an estimate for the missing time period. For us, there has been no problem or issue till date while making a PPI claim that goes beyond the six years time limit.

Where it gets slightly complicated

To be very honest, it is not always as simple as it sounds. Each bank/lender follows a different practice which is where the process of claiming PPI can get slightly complicated.

In other words we mean, some banks/lenders follow the six-year time limit very seriously and dispose any records as soon as the time limit is reached. Alternatively, there are few other banks that hold records of their clients for a much longer time than the imposed time period.

Regardless of the fact whether your bank/lender holds records for six years or not, we still put legitimate claims through and observe whether the bank/lender has the required details for the given client or not. If they do not have the details, we usually ask them to calculate an estimated amount instead.

What about the claims prior to the six years time limit?

Most people that came to us seeking guidance on “How far back PPI claims can go?” are those whose policies go beyond the six years time limit.

While the FOS is unable to make successful claims for these people, we have successfully won many cases for our clients those have claims that go back to the 90s.

Even though the new regulations that most banks and lenders are bound by came into force since 2005, most high-street banks were still subjected to regulatory schemes prior to 2005. As a result we are not faced with any problem while complaining to the FOS against the major banks/lenders existing prior to the year 2005.

Exposing and Exploiting Loopholes

Usually, the banks or the lenders are the ones that exploit loopholes for their advantage. However, our team of experts have turned the tables around and exploited loopholes that are more beneficial for our clients.

If carefully observed, some of the banks/lenders were not regulated prior to 2005. This means that we cannot complaint against them directly to the FOS. What we can do instead is, exploit a loophole. In simpler words, even though the bank/lender was not regulated at the time, the underwriter of the insurance policy would have been regulated.

During the initial period of making PPI claims, the underwriters used to refuse any type of involvement in the mis-selling when we approached them for PPI refunds. All they said was, they had nothing to do with the lender and thus they refused to pay any compensation.

So, we started using different approaches. We started a process of carefully collecting records of such cases and have now gained enough expertise to not let the underwriters play the card of refusal.

It Is the Duty of the Underwriter to Ensure Fair Sales

When taking a loan or other finance agreement, you either take help from a broker or a lender. No matter which way you decide to go, our team believes that it is the responsibility of the underwriter to ensure that the PPI policy sold to you alongside the finance agreement is suitable for you or not.

On the basis of this belief, we simply forward the cases involving mis-sold PPI policies (prior to the year 2005) to the underwriter. This is done keeping in mind that it was their sole responsibility to ensure their products were being sold correctly and in line with their regulations.

If they fail to do so, we believe that they should be held responsible of the mis-selling of PPI policy to the customers.

However, the actual scenario is a little different, as the underwriters do not easily hand over the money. It is the responsibility of the claimant or the claim management company to prove an association between the seller of the PPI policy and the underwriter.

During the initial stages of claiming mis-sold PPI, most underwriters refused to give away compensation to their customers. Hence, we collected records of such cases at the FOS against the underwriters. In the end, the underwriters were/are left with no choice but to accept their mistake and compensate the affected customers with the rightful amount they deserve.

The only time this approach won’t work is when we cannot prove an association between the lender and the underwriter. This is usually the case where an independent broker sold the PPI policy to the client prior to 2005.

Here, the independent broker does not have any association with the underwriter and so the underwriter cannot be held liable. Moreover, the independent brokers are also exempted, as they were unregulated during that time.

How Far Back Can You Claim PPI?

As you now know, you cannot have a single answer for this question. Most people believe they can only claim the PPI policies that are less than six years old. However, this is not the case.

A mis-sold PPI policy that goes far beyond the six-year time limit can also be claimed if the claimant can successfully prove an association between the broker/lender and the underwriter.

The only time when we were unable to prove an association between the broker/lender and the underwriter is when the broker is an independent broker and the PPI policy was sold prior to the year 2005.

Other important points to note down when investigating how far back you can claim mis-sold PPI is that the six year time limit comes into effect only when your finance agreement has naturally ended or was terminated.

If your finance agreement has an active status, start claiming for mis-sold PPI today!

On the other hand, if your finance agreements initiated 20 years back, but you stopped paying for it anytime in the last six years, you can still make a successful claim.

By going through this, we believe you have got the answer to your question of ‘how far back can you claim for mis-sold PPI?’

Claiming Mis-Sold PPI Without Paperwork

Claiming mis-sold PPI especially when you do not have certain essential paperwork or have forgotten your account numbers used to be a challenging task previously. Until recently, it was nearly impossible to get mis-sold PPI compensation for those without the necessary paperwork.

This situation has changed and claim management companies can now easily make a successful PPI claim without paperwork and without account numbers.

What will you require?

There are most likely to be two ways to claim mis-sold PPI without paperwork or account numbers.

First option is probably the simplest one. All we require is your full name and your previous address history. Along with this information we would require the name of the bank you believe mis-sold PPI to you.

Once we get the information about the bank you feel might have mis-sold PPI to you, we take your full name and your previous address history and run it through their entire database. By doing so, we get information regarding each and every type of loan, credit card, mortgage or any other finance agreement you have had with the bank. Moreover, the detailed information will show us which of those agreements has/had PPI attached to it.

Additionally, while your banks/lenders go through their entire database to retrieve your full credit history, they even search through their sister companies’ databases. Remember that not all companies will search through the databases of every other sister company that falls under the same umbrella.

Who is eligible to use this service?

All the people that believe they were mis-sold the PPI policy by their bank/lender is eligible to make complete use of this service.

This process is however simpler for people claiming for mis-sold PPI via claim management companies.

For people claiming mis-sold PPI policy all by themselves are still required to provide their account numbers for each policy they wish to claim on. The method of claiming mis-sold PPI without account numbers is not available for people claiming PPI policy all by themselves.

Can you claim for mis-sold PPI without paperwork by yourself?

Yes, you can. However, you cannot just submit your name and previous address history like claim companies do. Here, you are required to run a credit check on yourself.

Nevertheless, it is a lengthier process, but it is the only option that is made available to you since you have chosen to claim PPI by yourself. To make the process simpler and faster, the only way is to make use of a claim management company that has this service in place.

Putting An End To The PPI Scandal

The PPI mis-selling scandal has been dominating the financial authorities of the country for over a decade now. To put an end to the country’s biggest financial scandal, the FCA has set a final deadline to make all the claims.

In March 2017, the FCA declared a deadline of August 29, 2019 for all the people seeking compensation over the mis-sold PPI. Even though millions of people have already received their compensation amount, the FCA believes that there are many others who may not have claimed PPI yet. Imposition of deadline will urge these people to move out and make a claim. Moreover, the banks have set aside another £40 billion to cover the payouts.

The FCA also decided to run a two-year public awareness campaign (which has started from October 2017). This awareness campaign is said to constantly remind people about the deadline and urge them to make a claim.

Initially when the deadline was announced, the FCA had to deal with a sudden surge in the number of complaints from the UK citizens. Nevertheless, it also led to a fresh wave of texts and recorded calls by the claimants.

Consumer groups believe the process is entirely inadequate

Andrew Bailey, the Chief Executive of the FCA in one of his interview said, “Putting a deadline in place and a campaign increasing the awareness of mis-sold PPI among the people will eventually urge the people to take actions rather than put it off.”

The FCA believes that two years is a reasonable time period for people to decide whether they wish to reclaim mis-sold PPI or not.

On the other hand, the five biggest banks that mis-sold PPI to its customers – Lloyds, Barclays, RBS, HSBC and Santander – are said to have collectively set aside an amount of £35 billion to cover the payouts.

There have been a few consumer groups that have criticised the FCA for imposing a deadline on making claims. They argue on the fact that it is the responsibility of the banks/lenders to proactively find and pay back the customers that were mis-sold the PPI policy.

They further claim that the entire process of claiming PPI policy is inadequate because of which it has driven people to seek help from claim management companies. Now that the FCA has imposed a deadline on the PPI claims, they should also make sure that the banks are putting in all their efforts to help the affected people get their money back.

There are also some financial experts who claim that imposition of deadline is a complete mistake. They believe that it is being done merely to protect the financial institutions and that the FCA is putting the protection of the financial industry ahead of the customers.

The Financial Ombudsman comes into picture only when claimants are unsatisfied with the compensation amount or have got their claims rejected by their banks/lenders. In other words, the FOS deals with the claims that financial institutions are unable to settle themselves.

For over a decade, millions of people have been so unsatisfied with their complaints and have been continuously facing rejection that they have consequently gone to the FOS.

A Chance to Claim

Apart from imposing a deadline on the PPI claims, the FCA also confirmed some new ground rules to claim mis-sold PPI. These ground rules were made based on the Supreme Court judgement in November 2014. The new rules are based on the famous Plevin case that further elaborated the definition of mis-selling PPI.

The decision was based on the fact that it was unfair of the company to not tell its clients about receiving a large commission on the sale of PPI. Based on the court’s ruling, the FCA decided that the compensation amount would be calculated if the company has paid more than 50 per cent commission.

People whose claims were rejected will receive an official letter explaining them the new guidelines that are now imposed for making a claim. Based on these new ground rules, people can then decide whether they are eligible to make a PPI claim or not.

Three reminders to make sure you claim PPI before the deadline succeeds

The FCA has given two years time period for all the people to claim their mis-sold PPI. Claims coming in after the deadline exceeds will no longer be entertained. Therefore, it is now the responsibility of the people to act as soon as possible.

We give you three reminders to make sure that you claim PPI before the deadline is imposed:

  • Account Numbers

It is beneficial for you to immediately rectify/remember the missing or long forgotten account numbers. It is especially beneficial for people whose finance agreements are between 10 to 20 years old.

Chances for these people to have forgotten their account numbers are high, but there are always some ways in which it can be recalled. If you are among the people who have forgotten their account numbers, you can conduct a personal credit check or conduct a data access request from your bank/lender.

  • Fill Out Your Information Correctly

Once you are done performing a personal credit check or a DAR, fill out the most essential details of your complaint effectively. Banks/lenders require your account numbers and other personal details to make sure you had PPI under your name mis-sold to you by them.

  • Claims Management Representatives

Having a claim management company handle your claim on your behalf might not be your obvious choice. But these are the professionals that are ready to invest the time that is required to make a PPI claim while you can relax and continue with your daily routine.

One of the major advantages of having a claim company work for you is that most of them work under a ‘no win no fee’ basis. This means, if you have been mis-sold PPI under your name, you pay them only when they help you make a successful claim.

Legal Opposition faced by the FCA

In an attempt to impose a final deadline on the PPI claims, the FCA found itself facing some legal challenges.

By now we all know that the FCA has imposed a deadline of August 29, 2019 for people to make their PPI claims. Claims received after the deadline exceeds will no longer be entertained.

Most Claim management companies however seem to be very unhappy regarding the imposition of deadline and had filed a case against FCA, which they eventually lost.

However, the claim companies did not back out and further moved on to appeal against the court decision. They requested for a judicial review against the FCA. The judicial review was filed on August 14, 2017.

The main reason behind the imposition of deadline is that the FCA wanted to put an end to the entire PPI scandal that has been a point of issue for over a decade now. Ever since the deadline was announced, the banks made sure to set aside a collective total of £35 billion for compensation of the PPI claims.

Not only the banks but also the people across the country are eagerly waiting for this issue to end. The FCA first announced in October 2015 that it was imposing a deadline so as to manage the outstanding claims in an orderly manner.

Claim companies were said to be holding their case based on the EU law that states the Financial Ombudsman Service is the authority that is entirely responsible to handle the PPI related disputes. Based on this jurisdiction, the claim companies argued that the FCA has no power to impose any kind of deadline on the PPI claims.

In their defence, the FCA claims that their decision of imposing a deadline on the PPI claims is a right thing to do and will be beneficial for the people and the UK economy. They further stated that they would continue to defend their approach no matter what.

Despite the threat of judicial review thrown at the FCA, they continued with the launch of the costliest ad campaign worth £42 million. The ad campaign is said to increase the awareness regarding the imposed deadline among the people. The promotional campaign has started to air from October 2017 and will continue to air all over the country until the deadline is finally here.

For those of you worrying about taxpayer’s money being spent on an ad campaign, there’s no reason to worry at all. Because funds for the ad campaign have been arranged by those banks and financial institutions that had a big role to play in the PPI mis-selling scandal.

The main purpose of the ad campaign is to make every individual across the country well aware about the two years’ time period to make a successful claim. Due to the awareness raised by the ad campaign and the implementation of deadline, the overall compensation amount for the banks is certainly going to increase.

During the first month of ad campaign, the banks/lenders noticed an enormous increase in the number of complaints for PPI claims. The FCA believes that the number of complaints will keep on increasing as the deadline nears.

The number of complaints are bound to increase mainly because of the new rules and guidelines based on the famous court ruling known as Plevin. Under this new ruling, people whose claims were previously rejected may now be eligible for a payout.

The New Rules and Guidelines

The mis-selling of PPI has been a source of great discomfort for financial firms all over the United Kingdom. It has managed to harm the trust and confidence that people had and has also acted as a massive drain of resources of firms who have been handling more than 18.4 million PPI related complaints.

Since 2011, these firms have been paying out over £26 billion in order to remedy the situation. The FCA, after extensive consultation on the future state of claims being made has published final rules and guidance.

Essentially, it believes that there should be an end to PPI claims and it can only be achieved by imposing a two years deadline on consumers within which they are to make their claims or lose out on assessment by firms or by the Financial Ombudsman Service.

The Need For New Rules and Guidance Explained

The rules and guidance for addressing PPI complaints has been in force since December 2010. Still, consumer bodies have been clamouring the FCA asking for more active steps to be taken to help consumers get a complete understanding of the probable issues.

This was demanded in case they were not satisfied with the way their complaints were handled.

Firms have also stated their concerns regarding the questionable practices of certain Claims Management Companies (CMCs) which have led to precious resources and time being wasted with the handling of claims that were poorly evidenced.

In 2014, the Supreme Court passed a significant judgment in the Plevin v Paragon Personal Finance Ltd case. This then laid emphasis on the fact that even in the absence of regulatory requirement for firms to divulge the commission paid to a lender or intermediary out of a PPI premium, there could come a tilting point where the commission given became so significant that non-disclosure could (taking into consideration all other circumstances) make the lender’s relationship with the consumer inequitable under s.140A of the Consumer Credit Act 1974 (CCA).

The court did not specify where the exact tilting point lay other than ruling that in Mrs. Plevin’s case, non-disclosure of commission that came up to 71.8% of the premium was “beyond the tilting point”.

Her case was then handed over to the County Court for it to decide the nature of relief if any should be awarded. This was to be considered taking into account all the personal circumstances and precise facts of her case.

The decision made harboured fear that there would be ambiguity and discrepancy in the way non-disclosure of commission complaints would be dealt with by the County Courts.

Alongside the backdrop, the FCA consulted on package of measures that were solely designed to improve the way firms dealt with PPI complaints since November 2015.

What Do The Final Rules And Guidance State?

In the light of the final rules and guidance, they make provisions for:

  • A novel rule that demands that consumers register PPI complaints within the respective two year deadline or lose their stand to get their situation assessed by firms or the FOS. This rule was first announced on 29 August 2017 and the deadline was proposed to be 29 August 2019.
  • To make people aware of this campaign, FCA led communications that informed people of the impending deadline. This began on 29 August 2017 and the estimated cost to make this successful came up to £42.2m which the FCA is believed to recover by a fee charged on the 18 firms that were responsible for generating most number of PPI complaints. The first half of the fee was collected on 30 April 2017.
  • In regards to the Supreme Court’s judgment in the Plevin case, new rules and guidance on the handling of PPI complaints were issued and have come into effect since 29 August 2017.

A Brief On The New Rules and Guidance On Plevin

The final rules and guidance state that when a firm is considering a complaint pertaining to a PPI policy that covers a credit agreement under s.140 of the CCA, it should be assumed that failing to reveal a commission and estimated profit share which when added together exceeds more than 50% of the total amount paid for the policy does point towards having an unfair conduct and relationship.

In such a case, the firm should grant redress amounting to:

  • The total amount of the commission in addition to the amount that represents the actual value of any payment (s) made in regards to the PPI policy under profit share agreements that were conveyed as a percentage of the premium, minus 50%. So, for instance, if 70% of the premium consists of commission and profit share, the difference between that percentage and 50% would be 20%.
  • The significant interest that a customer pays on that particular portion, for instance the interest paid on 20% in the point above.
  • Yearly simple interest on the total of the two points above.

The Difference Between Final Rules And Guidance From Past Proposals

There are four notable points that shed light on the differences. These are:

  1. When the FCA initially assessed the issues of non-disclosure, it mainly looked at non-disclosure of commission. In light of its last round of consultation, it has concluded that ‘profit share’ arrangements should also be taken into consideration.
    1. Such arrangements generally entitle firms to get back a certain amount of PPI premium money that has already been received by the insurer but is not ultimately used to cover for claims on policies. But, often this is on the comprehensive non-customer specific basis and it varies across different time periods and depends on which insurer was involved.
    2. Non-disclosure of any expected profit share sums have to be duly considered wherever possible. Also, non-disclosure of commission in terms of recognising whether an unfair relationship is present in respect of any redress that is then due to the customer also has to be taken in account.
  2. The FCA was aware that there might have been customers who had made PPI complaints in the past that were refused, but might be entitled to make a complaint again in light of the Plevin case. A rough figure of around 1.2m customers was estimated to fall in this category. So, it has become imperative for firms to look for such customers and inform them about being eligible to make a claim again.
  3. The initial rules and guidance regarding the handling of PPI complaints were expected to commence by the end of March 2017. However, it was shifted to 29th August 2017 in order to give firms more time to prepare themselves.
  4. FCA has made it clear that the time bar wouldn’t be applicable to complaints that’d be received in the future, which were previously refused on an existing PPI policy, especially if it was refused due to reasons linked to the sale, such as limitations, ineligibility or exclusions.

Changes in the Plevin rule and guidance to involve profit share would simply create complications in the way a claim is being assessed and how the refund is calculated. It would even increase the number of cases wherein an unreasonable relationship is being assumed and where refund has to be paid.

In simpler words, there’s also a possibility for a spike in the marketing activity by the Claims Management Company, which could lead to an increase in the volume of PPI claims.

Firms might have to set aside significant amount of resource to deal with all of this, but would now have 5 months with them to prepare. On the whole, firms would be pleased to see that the FCA is still dedicated to pioneer the two-year time bar and hasn’t extended it further.

Though a consumer campaign might cost them thousands of pounds, an overall drop in the uncertainty regarding PPI liabilities might possibly reduce the firms’ long-term cost of capital. These rules and guidance would assist firms in bringing the PPI issues to an orderly conclusion.

FCA starts the countdown to PPI claim deadline with an Ad Campaign

You must be well aware regarding the FCA’s costliest ad campaign that started in October 2017. The main purpose behind the ad campaign is to promote the deadline imposed on making PPI claims (which is August 29, 2019).

The ad campaign featured Arnold Schwarzenegger and an animatronic model of his head, which was seen urging the people of the UK to make their decisions about claiming PPI before the deadline is here.

The FCA introduced a deadline so that people can make up their mind whether they wish to make a claim or lose their money altogether.

The FCA, after imposing a deadline on making the PPI claims, also designed this ad campaign with a hope that all these efforts will finally put an end to the decade old PPI scandal. Until 29th August 2019, the campaign will continue spreading awareness about the PPI scandal and the procedure to get back what you rightfully deserve.

Andrew Bailey, Chief Executive of the FCA quoted:

“Our ad campaign aim towards cutting the PPI scandal entirely. We want to encourage the people of the UK to make a firm decision whether to find out they had PPI (wrongly sold to them) and whether to complain or not. Our and Arnie’s message to people is ‘Do It Now!’ and I urge people to make a decision before the deadline of August 29, 2019 is finally here.”

Ever since the FCA started handling the PPI complaints, over £27.4 billion has been successfully paid out to the affected victims of the PPI mis-selling scandal. PPI policies were wrongly sold to people across the country on a large scale alongside loans, credit cards, store cards and mortgages between the years 1990 and 2010.

The firms that mis-sold PPI to its customers, which include banks, building societies and credit card providers, have sponsored the ad campaign.

To make the process of making PPI complaints easier for the customers, the firms have moreover agreed upon certain number of steps. These steps include:

  • An option for the affected victims to file their complaints online
  • Making sure that the complaint forms are as easy and understandable as possible so that people can easily make a claim
  • Provide additional support for customers that require special guidance and help while submitting their complaints
  • Providing useful and free PPI check services for people’s benefits

The launch of the ad campaign also promoted the start of new ground rules for complaining regarding PPI. This means,

  • Affected victims of PPI mis-selling scandal are entitled to make a claim even if they were not mis-sold PPI in reality.
  • If an individual previously made a complaint and was rejected the claim, they may be entitled to make a complaint based on the new rules.

Moreover, the FCA has also initiated a new service of dedicated phone line that will be available to assist the people with whatever PPI related queries they may have. The FCA has also updated their official webpage to provide more information to the people so they make an informed decision.

Is the PPI Scandal Finally Coming To an End?

Having less than two years in place for the people of the UK to make their PPI claims, the FCA believes that the scandal will finally come to an end. Since it has been over a decade for the PPI scandal, the people of the UK are desperately waiting for the scandal to end.

Like we already know, the PPI policies were mis-sold on a large scale to people by their banks and the financial lenders. This was in an attempt for the banks and lenders to earn huge profits in return which otherwise wasn’t possible.

In the process of mis-selling the policy, the banks/lenders did not explain the terms and conditions of it to the applicant or in some cases made the policy to be mandatorily purchased alongside the financial products. While in some worst-case scenarios, the policy was sold to the customers without their consent.

It was after years when the FCA finally decided to step in, mis-selling of PPI policy qualified as a legal offence under the rules and guidelines imposed then. Finally, after over a decade of claiming PPI compensation and imposition of various rules and guidelines, the banks/lenders have paid out over £27 billion to the affected people.

This was when the FCA decided to put an end to this scandal by imposing a final deadline rather than continuing to accept applications for more years to come. August 29 2019 is declared to be the final deadline for claiming mis-sold PPI and it is expected from the people to start claiming PPI as soon as possible.

PPI Complaints Increasing Due to the PPI Deadline

Ever since the deadline has been imposed, the FCA office has been flooded with PPI complaints. However, the FCA believes that the numbers of PPI complaints are going to continue increasing, as the deadline gets closer.

The FCA also launched an official promotion of the deadline that began in October 2017 which featured the famous actor Arnold Schwarzenegger prompting people to “Do It Now!”

On the other hand, during the month of May 2017, there was a noticeable increase in the amount of money paid out by the banks/lenders as compensation. This was during the time when the FCA had thrown a small hint about imposing a deadline, which according to us may have caused the increase.

For those of you who don’t know, resolving a PPI claim takes up to six months of time and therefore we may not know the fate of our PPI claim until early 2018. Most importantly, it does not mean that people should avoid making a PPI claim thinking about the amount of time they are required to invest in it.

Claim Management Companies have been readily helping people and providing utmost support and guidance to make a claim. You can contact iSmart Consumer Services today to make a successful PPI claim.

Many People Are Still Due a PPI Refund

According to the FCA, almost 53 million PPI policies were sold to people, which mean that many people are still to come forward with their claims.

It is believed that there are thousands of people who still haven’t made a PPI claim (due to various reasons). There could be a million reasons why so many people have not stepped forward with their claim of compensation. This ultimately comes down to the fact that many people may or may not be aware that the PPI policy was mis-sold to them and that they are due for a refund.

Ever since the FCA decided to handle PPI related conflicts, they ensured from their end that the banks/lenders that mis-sold PPI policy to its clients do something about it. They suggested that the banks/lenders should personally write a letter, text or email the clients to inform them that they are due for a refund.

There have been several banks/lenders that did implement this suggestion and wrote to its customers informing them regarding their due refunds on the mis-sold PPI policy. While this suggestion was just implemented by few banks/lenders, there are many who are still uninformed and unaware about how to make a successful PPI claim.

To overcome the issue, the FCA decided to launch its own ad campaign. This campaign will raise awareness regarding the PPI deadline and as well as encourage people across the country to make a claim before time runs out.

The FCA along with the claim management companies and the banks is prepared to help the affected people by making them understand the new rules and guidelines under which they can file a successful claim. Moreover, the process of making a complaint has also been made simpler for the benefit of the people.

Will the Deadline End the PPI Scandal?

After all this, the only question on most people’s mind is: Will this be the end of the PPI scandal?

All the banks implicated in the scandal and the Financial Ombudsman Service (FOS) are hoping that all the efforts put in by the FCA and the banks themselves finally puts an end to this entire PPI scandal.

The banks have already paid out in billions to the affected people and are preparing themselves to pay out more in the ongoing claims process. On the other hand, the FOS even has a huge backlog of complaints that they still have to work through.

Just like everyone, we are hoping that the banks have learnt their lesson. With the money paid for fines, compensation and hiring more staff to deal with the backlash, banks are unlikely to want a repeat of this entire episode.

Will Banks Ever Be Trusted After The PPI Scandal?

Posted: 7th March 2018

Banks were always seen as the tools for saving and investing money.

People would go to their respective banks with the hope of earning a handsome interest on their investments and to borrow funds for their needs. Also, the financial products sold by the banks were perceived to be highly beneficial to the buyers.

However, when the Payment Protection Insurance (PPI) scam was exposed, loyal bank customers were in for a shock! It was revealed that majority of the policy was mis-sold by the most trusted commercial banks and card companies in the country.

The banks sold the policy to the customers secretly without letting them know about it. Also, there were banks that only highlighted the positive aspects of buying the policy and deliberately hid the clauses that dealt with the commission to be paid.

As time went by, more people started discovering how manipulative their banks had been to them. This caused a great deal of resentment within the mis-sold customers that still continues even more than a decade after the scandal was exposed.

Big Banks; Big Offenders

Major offenders of the scandal include banks like the Royal Bank of Scotland (RBS), Lloyds, Barclays and HSBC. Out of these banks, the cases of Lloyds and RBS have been some of the most shocking the financial world has seen.

It is often reported by the mis-sold customers that the employees at the Lloyds are trained by their executives to slack in taking on the cases of their customers. Allegedly, the employees would deliberately slow down the process and take much more time than actually required. According to the officials, this would ensure the customers lose hope and gradually forget about the matter.

The banks tried anything to minimise their losses after getting hit hard by the PPI blow. Furthermore, there have been cases of banks asking for a portion of the refund back from the customers after paying them the refund. As customers didn’t know the exact compensation they were supposed to receive, the banks took advantage and tried to claw back as much money as possible.

Though there have been several losses to several banks due to heavy compensations, RBS can be considered as the one that suffered the most. The bank has been in such trouble that the losses amounted to as much as £7 billion in 2015!

Since 2006, RBS has been struggling to make profits. When the bank suffered a loss of £7 billion, it was the ninth consecutive year the bank had gone into losses. The bank owes its loss to the provisions created for several issues that were created by themselves.

RBS has been dealing with a legal issue with the US Department of Justice for a long time, regarding the mis-selling of toxic mortgages. The bank also had to set out a provision especially to deal with a failed attempt of spinning off their Williams and Glyn venture.

The Magical RBS (Almost) Recovery

As the issue prevailed, the bank decided to cut down their costs by £2 billion dollars over the course of 4 years. As the decision was made in 2015, the coming years witnessed a lot of job losses and branch closures. Ross McEwan, the Chief Executive of the bank said in an interview with BBC that the closing of branches and cutting of jobs was inevitable. He further added that their staff and their policies are changing for the good and they hope to recover from their losses soon.

The bank, that is 72% owned by the UK Government, has suffered a total loss of more than £50 billion. The second greatest loss that follows was the one amounting to £45.5 billion which was the taxpayer bailout made during the financial crisis.

Though the bank finally made its first profit in a decade, the penalty to be paid to the US authorities still looms over the bank, overshadowing the profits.

After all this chaos, it’s become difficult for the customers to trust their commercial banks before making an important financial decision. As opposed to earlier times when banks were considered as one of the most trusted financial advisors, it seems that the banks in the UK have lost that reputation with their loyal customers.

What Can Banks Do Now to Regain Their Customers’ Trust?

Though the banks have been working day and night to make sure that their clients get their compensation back, the damage is so huge and the actions have been so manipulative that every customer would now think several times before consulting their bank for financial help.

All the commercial banks and card companies can now do to instil trust in their customers is solve all the mis-selling cases as soon as possible. There are banks that are still slacking in their approach, waiting for the deadline to arrive so they are freed from the burden. But surely trust of their customers is more important than the money they would save.

Some banks are already taking steps to improve their tarnished image. Lloyds, possibly the biggest offender, is reported to give extra dividend to their shareholders out of the profit made in the latest financial year.

This was an important step for their hugely affected shareholders. This step has marked the beginning of the trend the banks that have now started to reap in profits are likely to follow to improve their image.

However, no matter how hard the banks try to compensate for the damage they caused more than a decade ago, the customers would never have full faith in the financial institutions. This doesn't seem to end anytime soon either, as there are still millions of mis-sold buyers waiting for their claims to be passed by the banks and to receive the refund amount on time.

Lloyds May Be The Bank To Watch During This PPI 2018 Season

Posted: 28th February 2018 & filed under PPI

Out of all the banks accused for their notorious share in the infamous PPI mis-selling scandal, a major name that has been looming around since the beginning of the scandal is Lloyds Banking Group.

People may be talking about millions stuck with Barclays and the PPI compensation to be received from RBS, but Lloyds seizes the limelight when it comes to the mis-selling regime. It is not only the bank that has been accused the most, but is also one of the first offenders of the scandal.

The bank has been reported to set aside billions specially to take care of the PPI issues faced by its clients and the mis-sold customers. However, people were shocked when the Chief Executive of Lloyds, Antonio Horta-Osorio, announced an extra dividend to their shareholders amounting to £2.2 billion. This is because the bank made a mammoth profit in the year of 2016.

In spite of several other accusations made to the bank, the profit made by the bank raised several eyebrows across the country. This is why all the investors are curious for the annual results of the bank to be announced in the last week of February, 2018.

The value of the bank’s shares remains the same as they were in the precious year in spite of several recommendations to buy their shares after he profit. Also, the bank gave a promise of dividend amounting to more than 7% in the next three consecutive years for the investors willing to invest in the money.

Horta-Osorio is likely to declare his plans on behalf of the bank on the 18th of February this year to which majority of the country is waiting for. He has also promised to chart out a detailed plan for 2018-2020 and to declare the full-year results for the current financial year publicly when he makes his famous statement this week.

Monitoring Lloyds’ share prices, Brexit, and the impact of PPI refunds

There are several speculations about the measures to be taken by the bank and the share prices to be quoted by them after fighting with the infamous PPI battle. After looking at the bank’s previous earnings, Lloyds is assumed to be a superior banking power for the years to come. It is also speculated that the bank would announce an additional share capital of 1.2p per share in case of special distributions, which are most likely supposed to be the share buy-backs.

The analysts have been watching all this very carefully. UBS are of an opinion that the shares would amount to nothing less than 85p per share, with Lloyds having the potential to outperform every other bank in the year of 2018. The other bank that was equally assumed to emerge glorious after facing huge downfalls due to constant PPI checks and refunds was Barclays and its card company, Barclaycard.

A major reason behind this is also the fact that majority of the investors have now become occupied with the issue of uncertainty looming over the Brexit talks. This leaves the domestic banks undervalued as compared to the ones functioning in the Eurozone, especially HSBC and Standard Chartered.

The UBS analysts have made another statement while previewing the coming season of banking results. They are saying that there is a fair possibility for the banking stocks to be re-rated only if the UK government agrees to a transition agreement with Europe. This would also be effective if the UK is capable of delaying Brexit until 2021.

Lloyds and their goal moving forward, post-PPI

After the dark period of dealing with the issue of PPI and making compensations on a daily basis, Lloyds along with the RBS has promised to provide their investors and shareholders with a suitable degree of comfort that would revolve around the ability to manage the ardent costs.

Lloyds has also declared that it would make an update in the further requirement going forward, with an assumed Common Equity Tier 1 (CET1) ratio to be 13.7%. This is much better compared to the previous year where the bank paid dividends to a level of as low as 13%.

In the previous years, majority of the provisions were dominated by the issue of PPI. This year, Lloyds added an amount of £1 billion to bring the total compensation amount to be a whopping £18 billion.

In spite of this huge amount being set aside, UBS analysts still feel that there will be a need of an extra £500 million for PPI, as the average weekly claims are still around £11,000 every week.

However, Lloyds still believes that they would generate enough capital in order to finance a dividend capable of yielding 7%-9% in the years 2018-2021. No matter what statements are made against the bank, Lloyds is currently beating UBS’ estimations by earning 8.7 times more than the estimates made for 2018.

Another twist in the tale, this time from Barclays.

Barclays was supposed to have a share target price worth of 225p. it has come as a shock to everyone as the figure was announced after the bank’s earnings being reduced by 10% because of the poorer revenues available in the capital markets. This is purely on the basis of how the bank is currently performing in the market.

The financial analysts also add that banks like HSBC and Standard Chartered also have a fair deal of their shares to prove regarding their annual results on 27th of February, 2018.

However, the issue looming over the RBS in spite of the bank making considerable profits after years is that of an uncertainty about the scale regarding the settlement of the bank with the US Department of Justice. This issue arose when the bank asked for help from the US due to the mis-selling of the mortgage-based securities that were residential in nature.

Nevertheless, all eyes will be on Lloyds, the front-runner of PPI scandal as it would chart out its records and plans for the years to come after recovering from the fatal blow called PPI!

The PPI Refund Questions You Should Really Be Asking

Posted: 28th February 2018 & filed under PPI

Fact-file of Payment Protection Insurance

  • Approximately, 45 million policies have been sold wrongly to people
  • £27.4 billion has already been repaid in compensation
  • Lenders, banks, financial institutions and building societies have been heavily affected
  • The last date to make a claim is 29th August, 2019

According to the terms of a Payment Protection Insurance (PPI) policy, individuals who invest in one are provided with cover for repayments. This is in case the borrower becomes sick, loses their job or are unable to work.

While the intention behind PPI was not necessarily bad, the level of mis-selling that occurred was starting to hit the news. It reported that many financial institutions mis-sold PPI policies to housewives and self-employed people who were unable to apply for a claim.

As consumer groups began to get involved and the PPI fiasco came to light, many customers started realising that they could have been mis-sold PPI. This is when people started applying for PPI claims. The Financial Conduct Authority (FCA) has been the driving force behind this initiative. They’ve been forcing banks to play ball and settle PPI claims fairly, which led to claimants receiving refunds for their policies.

Millions of consumers have been mis-sold PPI by several banks in the United Kingdom. According to the FCA, “A total of £398m was paid in November 2017 to customers who complained about the way they were sold payment protection insurance (PPI). This takes the amount paid since January 2011 to £29.2bn.”

Knowing that, the next big question will have started churning in people’s minds. This PPI compensation amount...would they be liable to pay tax for it?

Is PPI refund taxable?

Yes, PPI refund is taxable but the tax is calculated on the interest amount.

For example, if an average refund amount that an individual obtains is £1000, of which £240 constitutes the compensatory interest paid by banks. Now, the government taxes this interest at a basic 20% rate. Of the £240, this means that £48 is owed by the claimant in tax.

There have been many such cases in the history of mis-sold PPI and the most basic ones include:

  • An individual has received £16,000 as compensation of which £1,536 goes to the treasury.
  • Individuals who have a huge PPI compensation amount because of overdrafts, personal loans and credit card loans for several years are charged with 15-29% interest rates.

Your compensation is charged at an interest of 8% while your tax is deducted from the interest amount based on which category you fall in the tax band. For instance, if you are a basic taxpayer you owe 20%. And if you belong to a higher tax band, the rate is about 40% or 50%.

Many people are not aware that they are liable to pay tax on any interest amount they receive. This interest is a one-off payment and you can actually pay this amount without entering the self-assessment system. All you need to do is inform the HM Revenue & Customs (HMRC) and mention your tax code to make the necessary adjustment and payment.

Check if tax is already paid.

It is essential to check whether or not the tax payment on your PPI compensation has already been paid. There is a possibility that the tax might be directly deducted from your compensation. This mainly differs from company to company.

The HMRC mentions that banks and other financial institutions are not obligated to shoulder the responsibility of deducting taxes. This occurs because there are specific exemptions for them in tax deduction from yearly interest.

In fact, it’s compulsory for companies to deduct tax from yearly interest as and when paid. In case the company makes a tax deduction they should also inform customers about the same. If and when you receive the refund letter from the company, they are liable to inform you that you need to pay tax on the interest.

Keep in mind the following factors:

The amount of tax that you are supposed to pay depends on various factors:

  • If you are a non-taxpayer and your tax has been deducted from the interest, you have complete authority to claim back your deduction. In case you are a basic taxpayer and tax has been deducted from your interest, there is nothing to worry about.
  • If you need a complete tax return, you must enter specific amounts in the right section.
  • If you are a higher rate taxpayer and have obtained interest with or without tax deduction report it to the HMRC. If tax is not deducted from interest make sure that you contact HMRC and carry out the needful formalities.

The misconception about refund tax.

Many people believe that refund tax is calculated on the entire refund sum, but in reality it is calculated only on the interest amount. The tax man considers the fact that refund is your sole right. But the interest is the part where they have their contribution.

PPI payday: getting your tax back.

You can apply for tax back by filling in the R40 form and posting it to HMRC. You have to be careful while filling the form and mention correct details in it to ensure that the process goes through smoothly.

Claimants that have received multiple refunds inclusive of the 8% interest in it need to be careful of the following factors, which we’ll sum up below:

  • Include all refund payments where 8% interest was added even those, which the lender did not deduct, tax off.
  • If you have received any other interest from your taxable bank account include that as well.
  • Avoid including any interest, which is not 8% as it might not be taxable.
  • Do not include other interest from National Savings and Investments (NS&I) or Individual Savings Accounts (ISA) as they are not taxable.

There is a possibility that you may receive your refund within six weeks but it mainly depends on the financial institution or bank handling the process.

PPI refund calculations.

There are different methods through which you can calculate your PPI refund. Mostly, people prefer to calculate their refund amount manually or by using online calculators.

It is vital to know all the important figures pertaining to your PPI payout before you actually start the calculation process.

In order to determine the accurate refund amount you must consider the following factors while doing your calculations:

  • Loan amount
  • Annual percentage rate (APR) on your loan
  • Monthly loan payments, which you’ll be charged, excluding PPI payments
  • Long term (tenure of the loan)

Once you determine your APR, divide that figure by 12 and then multiply the figure with your monthly balance. It is necessary to analyse how much you have paid or are currently paying for the loan while making the calculations.

A simple way to do this is by checking your monthly statements and calculating the sum of all premium and interest payments you made to know the exact amount.

For example, if the cost of PPI was £1 for every £100 then imagine the amount for £100,000 over a span of 25 years. That’d be £1,000!

In the history of PPI claims, mortgage claims have received the largest amount refunds, mainly because the amount borrowed and the tenure of policy was comparatively greater than the others.

Another reason why mortgage related PPI claims are seen by many as ‘more serious’ is that the sum amount of these mortgage policies is quite huge. Therefore, so is the compensation.

The simplest way to analyse whether you have been mis-sold PPI along with a mortgage is to check your paperwork. If you find any traces of PPI, Accident, Sickness and Unemployment cover (ASU), payment insurance or similar terms you can seek assistance from us.

We can carry out a free PPI check and inform you whether you have been mis-sold PPI in the past or not.

Some people are very hesitant about bringing forward their PPI claims especially if they can’t locate important paperwork with respect to their mortgages, loans or credit cards. If you are stuck in a similar situation, you can get in touch with your lender and ask them to share a copy of the paperwork with you.

At times, it is tricky to get these documents from lenders, especially if it’s over six years since the account was closed. But you can try for it either way.

This prevents a scenario wherein you are mis-sold an insurance policy and are unaware about making additional payments for it. You may not have necessarily been mis-sold a PPI policy but it is essential to check for it all the same.

What is a PPI refund windfall?

Have you ever gone through a PPI compensation process or heard about someone else’s experience? Are you aware about the fact that the interest amount of your refund amount is taxable?

If you have read through this guide to reach here, you will be aware about it already, but if you have landed in this section directly, a quick summary should help.

Banks and other financial institutions that pay out PPI refunds to customers also notify the HMRC about it. They also mention whom they have paid the refund out to and the total compensation amount presented.

Financial institutions and banks mainly operate on two approaches that are not without fault. Some banks have paid out compensation to customers without deducting any tax. Others have deducted basic rates without taking into account which tax bracket the customer falls into.

These institutions or lenders have basically overlooked the fact that every individual has a different tax position. And that means the tax obligations also vary. For example:

  • Basic rate taxpayer:

Firstly, determine whether you are a basic taxpayer with some additional income. Secondly, if you have received gross interest this means you have tax liability to HMRC based on the self-assessment norms.

Now, if the basic tax rate has already been deducted from your refund you do not owe any tax to the authorities.

  • Higher rate taxpayer:

If you belong to this bracket you have to reveal the interest income that you pay every year on your tax return. This will help to determine whether you fall under the top up (basic tax deduction) category or have received gross amount.

  • Currently not a taxpayer:

If you do not pay tax then you need to get a confirmation of whether you still remain a non-taxpayer with your PPI income. There is a possibility that you may be paid gross PPI interest, which means it is inclusive of the tax paid to the HMRC.

There is also a possibility that your tax has been deducted but you currently belong to a category below the threshold. In this situation you can claim a refund from HMRC.

It is also important to check whether you have mentioned all relevant return details in this year’s tax return before you submit it.

PPI refund tax changes.

Several tax changes took place in April 2016. These changes have a significant impact on the taxation of the interest. You must keep these changes in mind when dealing with compensation amounts of mis-sold PPI policies. These include the refund and statutory interest of 8% included in your compensation amount.

As mentioned earlier, only the interest part of your refund will be taxed. For instance, if the policy is 10-12 years old then the interest will add up to a substantially amount.

For instance, if Mrs. G, paid £3,747, she will earn a gross 8% interest of £1,463, minus basic rate tax deduction (£292). This means the total settlement will approximately be worth £4,918.

The new changes include:

  • If you are a basic taxpayer the first £1,000 of interest from your savings is deemed as tax-free.
  • If you are a high taxpayer £500 of interest is tax-free.
  • Banks do not cut tax from interest they pay, as people won’t have to pay any tax.
  • If you have to pay tax then it can be collected by changing your tax code.

The interest that you receive in PPI refund is treated similar to the interest earned on your savings.

What if you declare bankruptcy during the claim process?

By the time you receive your refund or apply for it you may have declared for bankruptcy. There are certain different rules for individuals who have turned bankrupt prior to or during their claim process.

If in case you brought forward a PPI claim while you were bankrupt there is a very slim chance that you will see any money received as part of your compensation payment.

If you were mis-sold a PPI policy before you became insolvent then any compensation received thereupon is considered an asset. This means that all your assets are likely to be transferred to the official receiver or trustee.

Even if you have been discharged from bankruptcy the rules remain the same, which means that your refund will be handed over to a trustee or concerned officer.

These official receivers have legal authority to claim the money and settle outstanding debts against your name. If all the debts/obligations are settled you might get back a portion of your PPI winnings.

How to start a PPI claim during bankruptcy

If you have been mis-sold PPI policy, you can start by informing the official receiver about the same. In fact, before actually applying for a claim you must check with your trustee or official receiver.

Additionally, if you have already applied for a claim then you must inform your bank as well as trustee or legal receiver about the mis-sold policy and claim. There are chances that the payout might be directly passed on to the official receiver or trustee. Thus, it is important to clear all details with the concerned authority.

The trustee or official receiver may end up obtaining the entire sum of the compensation.

On the other hand, when you are released from bankruptcy, you can keep the inheritance or lottery win. A PPI reclaim is managed differently under such circumstances. This is because if you are granted a PPI compensation it is counted as an asset and therefore, the official receiver has complete ownership over the compensation amount.

The ticking clock

You may have heard about the official PPI deadline by now. But, do you know that the FCA has launched a campaign to increase awareness about the mis-sold policies?

This is being done with the intention of informing people that they have stipulated period within which they can apply for a claim.

The FCA has already initiated an awareness campaign starring Arnold Schwarzenegger. If you have been putting of your PPI claim for a while, now is a good time to get started, as the backlog of complaints and the subsequent delay will rise as the deadline approaches.

Here are some important facts related to the upcoming 29 August, 2019 PPI claim deadline:

  • People who have been mis-sold PPI need to apply on or before 29th August, 2019 or else they lose the right to apply for a claim.
  • New guidelines were implemented based on the outcome of the Plevin case, which involved the claimant Susan Plevin and Paragon Personal Financial Ltd. The Supreme Court’s decision on the case--which was about undisclosed commissions on PPI policies--has paved way for further avenues of claiming PPI via the ‘Plevin rule’:
    • Firms are now needed to reconsider rejected mis-sold complaints that are now eligible under the Plevin ruling.
    • The deadline is not applicable to future complaints, which concern a rejected claim on a current PPI policy. This is in case the claim was rejected for reasons to the sale, ineligibility, limitations or exclusions.
  • Most of the rules and regulations will be implemented from 29th August, 2017 while some are applicable since March, 2017.

You may have an earlier deadline if you have already received a redress letter from your bank. If your bank has sent over a redress letter in the time span of 2013-15, your PPI claim deadline is three years from the date you first received the letter. Not the August 2019 deadline.

So, start skimming through all your postal correspondence with your bank and check if your bank previously sent a redress letter to you, as it has ramifications on when you can bring forward a claim.

On the other hand, if you fail to find the letter you can contact your bank and enquire whether they sent you a redress letter to begin with. This is the best move in your current situation and it is important to start the process as soon as possible, as your final date is different than other people.

If you start today, you can make sure that you do not miss-out on any important step in the reclaim procedure.

Previously rejected claimants get a second chance to claim successfully

According to FCA Chief Executive, Andrew Bailey: “the main aim of the advertising campaign is to encourage people to decide whether they have been mis-sold PPI policy or not.”

The result of this campaign is likely to increase the number of claims and successful re-submission of eligible rejected claims.

This initiative by the FCA has resulted into a major U-turn for rejected claimants as they get a second chance to reclaim their hard earned money.

What if the company that mis-sold you PPI no longer exists?

There are good chances that by the time you apply for a claim the bank or financial institution has gone under. In such a scenario you can seek assistance from us as we have experience in dealing with such situations.

We will start from scratch by first determining that you have been mis-sold the policy as it can set the course for further action. This also helps us to collect relevant information about that particular bank or financial institution.

We can also get a credit check done, which mentions necessary details of all your financial agreements in the past four to six years.

You can contact the lender and check the terms of the policy you were sold as they are subject to change over a period of time. If you were mis-sold a policy during the late 1980’s it might be difficult to trace your credit history.

In such circumstances, you have only one option to contact your bank and collect all necessary details.

Initiative to make the PPI claim process simpler

The time-consuming nature of the PPI claim process has led to many people not making a claim at all. Many are also of the belief that applying for a PPI claim involves numerous legal formalities, which leads to a long, drawn-out process.

In reality, the claims process for PPI is evolving and it is comparatively simpler today than what it used to be earlier.

Moreover, credit card companies and banks have agreed to stick to a uniform process, which is easy to understand and implement. This common procedure minimises hurdles in the process as both parties involved are well aware about their roles and responsibilities.

Additionally, unnecessary to and fro of the paperwork is reduced, which results in less miscommunication.

Making your own claim

Victims are being requested to act as soon as possible on their PPI policies as a time limit has been set for future claims. Besides, the claim process is not entirely quick or straightforward.

On the other hand, patience and persistence are the only two ways to fruitfully resolve your claim.

PPI was majorly sold during 1980’s and early 2000’s but the consequences of this fiasco still remain. There are individuals who prefer to apply for a claim on their own. To these individuals we would suggest a simple process that can really work for them.

This process is more suitable when you are not in a complex situation and have all the necessary documents at hand. You also need to have sufficient knowledge about the current scenario and various norms that you would have to follow.

The process of a successful PPI claim consists mainly of five steps and they are:

Step #1

The first step is to check whether you have been mis-sold a PPI policy along with a loan or any other financial policy. You will have to check all documents that you have held for that particular policy. This includes documents about paid-off loans or mortgages.

It is very possible that you were sold a PPI policy along with a loan that has already been repaid. You can also contact the concerned bank or lender to gain relevant information about your transactions.

A scenario wherein you felt compelled to buy a PPI policy because of it being implied that the success of your loan/mortgage application depends on it are increasingly commonplace. Even though you bought the policy yourself, such a scenario is considered as mis-selling.

Another mis-selling possibility is that you could have been sold a PPI policy while you were working at that particular time, self-employed or were already suffering from an illness. As self employed customers and those suffering from pre-existing medical conditions are excluded from claiming on the PPI policy, it is considered as mis-selling.

There have been quite a few cases wherein DIY complaints have successfully acquired reclaims. For some straightforward claim scenarios, it is easy to make the claim by yourself.

An average payout of £1,800 can be expected for a PPI claim.

Step #2

The next step is to complain about the mis-sold policy to the lender with the help of all the relevant paperwork that you have with you.

Step #3

Your lender or bank official must reply to you within a span of eight weeks. If they do not do so, you can contact the Financial Ombudsman Service (FOS).

You can also contact the FOS if you are sure that you deserve a better refund amount than what the lender is currently offering you. You can calculate the refund amount based on your premium payments and the duration of your policy.

You need to remember the following when you are applying for a claim on your own:

  • Be completely honest.
  • Get your facts right and gather all relevant and necessary documents before you apply for a claim.
  • Keep your emotions at bay. Do not connect your personal or professional life along with the claim as it may affect the outcome.
  • Any and every record can be useful. Keep all records with the lender or credit Card Company guarded. Do not throw them away.
  • The PPI compensation process is rarely instantaneous. Therefore, be patient during the process and let it run its course. The bank or lender also requires time to process your application and verify it.
  • If you know that you are right be determined in your pursuit of claiming compensation. Do not give up.

Free PPI check

iSmart offers a free PPI check because it is the most crucial step in the process of making a PPI claim. It is not necessary that you have PPI only with one of your financial agreements. It could have been mis-sold to you with other loan, mortgage, credit card or car finance agreements as well.

This free check reduces the efforts from the lenders end and thereby saves lot of time as your process can move at a comparatively faster pace.

iSmart follows this simple process to check whether or not you have been mis-sold a PPI policy:

  • Check for PPI:

We begin the process by sending a PPI request to the lender. The lender has 40 days to share all your previous transactions with us. We try contacting them again after 50 days, so that we can analyse the paperwork and determine the correct course of action.

At times, people assume that they have been mis-sold just one PPI policy but a comprehensive check shows that multiple PPI policies were attached to previous agreements.

Additionally, it is not necessary that you have been mis-sold PPI instead you could have misinterpret a different policy to be PPI.

Once we conclude that you have been mis-sold a PPI policy we get in touch and update you on all our findings.

  • Confirmation of PPI policies found:

We will get in touch with you via email, letter, message or phone call to inform the result of our free PPI check. We will also inform you if PPI was attached with any other loan or mortgage you took out previously.

At times, PPI was sold along with other policies but it was terminated soon thereafter. Such instances initially indicate that you have been mis-sold PPI when the records show that the policy was duly cancelled.

It is only after in-depth investigation that you can determine if you have grounds for a mis-selling claim.

You are not entitled to any refund if you were not sold PPI.

  • What you should do next:

If you think that PPI was mis-sold, you can seek assistance from us and we can get the claim process started on your behalf. If our PPI check shows no PPI, the process ends here itself.

If PPI is found via our check you are left with two options. You can either contact us to take the claim process further or apply for a claim yourself.

Let iSmart handle your claim.

If you want us to take your claim forward, we get the process started by carrying out in-depth research about your situation. After that we fill out a detailed PPI reclaim questionnaire on your behalf based on your inputs. This can be done over the phone and we will also send you a copy of this questionnaire to get your official consent.

Along with this, we will send you an agreement mentioning all details about the terms and conditions with respect to the services we offer. If you agree to all the terms and conditions you need to send back a signed agreement, which showcases your consent. .

How far can I go to claim back PPI?

Some companies mention that there is a fixed tenure of 12-15 years to claim back your PPI refund but as of now there is no fixed time duration concerning reclaim of old PPI policies. You might have been mis-sold PPI years ago, you still have the right to apply for a claim up to the 29th of August, 2019.

In fact, there have been many previous instances wherein old PPI policies were unfairly rejected by some banks/financial institutions. You can definitely claim again for PPI if you are sure that you have been mis-sold a policy. Get in touch with our experts if you are afraid of being rejected again. We can look into the intricacies of your case and help you take an informed decision based on our analysis.

We also go the extra mile for our clients by contacting the FOS to look into the matter if the lender or credit card company does not corporate or if the claims are being rejected unfairly. We can do this on behalf of our clients and minimise trouble for our clients in the claim process.

The FOS can analyse and study the case in detail. Thereupon, they can come to a valid and reasonable conclusion, which is fair for both parties. FOS looks into the pros and cons of the situation and comes to a conclusion based on it.

Considering all the factors and misconceptions we’ve been through, it’s important to apply for your claim as soon as possible. Especially as the PPI claims deadline looms!

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