Money Mensch: Mis-selling: get your cash back

By Martin Lewis, July 8, 2009
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If you have taken out a loan or credit card in the past six years, you could be in line for a huge payout. Anyone whose bank flogged them useless payment protection insurance (PPI) could get thousands in compensation.

Without doubt, PPI is the biggest mis-selling scandal for years.

The Financial Ombudsman just reported complaints trebling, with 89 per cent of them decided in the consumer’s favour. Not a day goes by without someone emailing me about another reclaim of thousands.

Does this apply to you?

Many people are paying for this policy but are unaware that they have got it.

Everybody, and I mean everybody, who has had a loan or credit card in the past six years should check if PPI was part of it. If so, there is a chance you were mis-sold. This applies even if the loan or card is now closed.

The reason people are unaware of the product, or at least unaware of its huge cost, is that it is commonly wrapped up as part of loan repayments. Typically, on a £5,000 loan over five years, £25 of the monthly repayment will be for this legally optional insurance, that is £1,500 over the life of the loan –— often substantially more than the interest on the loan.

Many lenders have been making far more money out of PPI sales than the interest on the loan itself.

Thankfully, since I first started ranting about this, outrage has spread. Even the big beasts of the Financial Services Authority and the Competition Commission have been investigating the PPI market. Soon, lenders selling PPI within a week of flogging a loan may be banned.
Can you cut the cost?

PPI in itself is not a bad policy. It can be useful for those wanting to cover loan repayments in the event of accident, sickness or unemployment. The big problem is that most people who have it are paying up to ten times over the odds. Instead, it is worth considering getting cover from specialist insurers like Paymentcare or British Insurance for fraction of the cost. Yet do not consider ditching and switching if you have developed a medical condition since taking out your policy, or if there is a chance of redundancy. New policies will not cover these, but your existing one will.

Were you mis-sold?
The categories of mis-selling are vast, so here is a brief rundown. If any seem to apply, go to my full guide at www.moneysavingexpert.com/reclaimppi, where you can read about a category in full detail and download template letters.

Were you told or sold the wrong thing?
This covers everything from being told the insurance was compulsory, to not knowing you would even purchased PPI, to the fact that you were already covered through your work or partner.

Were you self-employed, unemployed or redundant?
If so, and the policy included unemployment cover, it is possible you were sold something that simply wasn’t protecting you.

Have you had medical problems in the past?
If you had medical problems when you took out the policy, and it was not explained they were excluded, you may have been mis-sold.

Has your provider already been fined for PPI problems?
Many major providers, including Alliance & Leicester, Egg and Capital One have been fined for not treating customers fairly.

Finally, were you sold a single premium loan policy?
This is the now banned system, where the whole cost of the insurance is added to the big lump sum at the start of the agreement, and then repaid over the term of the loan. If you had one of these and tried to change your agreement, you may be entitled to a partial refund.
Reclaim, Reclaim, Reclaim

Staggeringly, getting thousands of pounds back is not difficult.

Step 1. You must always first write to your lender, tell them you think you were mis-sold the policy and ask for your money back. Expect a rejection; that does not mean you don’t have a case, just it’s trying to put you off.

Step 2. Now we get to the main stage. Here you complain to the Financial Ombudsman Service, an independent body which can adjudicate and offer compensation. Over the last year, almost 90 per cent of complaints which reached the FOS have been adjudicated in the consumer’s favour, and it’s a totally free service.

You will probably have seen ads from claims handling companies offering to do it for you, yet they usually take 25 per cent plus of what you get back, which can be thousands. Many people can do this simply themselves, using the free template letters at www.moneysavingexpert.com/ppireclaim.

I would love you to be one of the people I hear from soon telling me you have just got a cheque for thousands of pounds.

    Last updated: 4:21pm, July 8 2009