PPI: An introduction

If you have been living in the UK for the better part of the last two decades, it’s highly unlikely that you have not heard of PPI. Especially now that the terminator-themed ads (featuring Arnold Schwarznegger) are out!

If PPI is still not ringing any bells, then it’s best that we start with a brief overview. A deadline has been imposed on PPI reclaims, so knowing the ins-and-outs of PPI can help you reclaim thousands of pounds before it’s too late.

So let’s get started:

Let’s get to know PPI a little better.

Payment Protection Insurance (PPI) is a policy that was sold along with credit cards, loans and mortgages to cover up the cost of repayments in situation wherein the policy holder was unable to make repayments.

PPI appeared to be the “rescuer” for people in the event of unforeseen circumstances that prevented them from making repayments. PPI was meant to cover repayment in situations where borrowers became redundant or faced a change in their income due to:

  • Unemployment
  • Accident
  • Illness  
  • Or even Death

Initially, the idea of having PPI insurance was quite reasonable as it ensured that you made your payments on time if something went wrong. But it became problematic when it started getting sold in a fraudulent way, as an add-on to loans and other products without the consent of the borrower.

It was even sold to the people who would never have been eligible to use PPI for any benefit. The majority of customers were not provided proper information regarding PPI insurance while it was being added to their loans or credit cards.

What did the PPI policy not provide cover for?

Generally, a PPI policy doesn’t provide cover for:

  • The immediate three months after being unemployed
  • Certain illnesses
  • Pre-existing medical conditions
  • Retired or unemployed people

When did PPI mis-selling begin?

The mis-selling of PPI alongside mortgages, credit cards and other unsecured loans came into practice during the early 1990s. The initial idea behind taking out a PPI policy was to cover payments on loans if customers were not able to do it from their end due to redundancy, sickness, or accident.

In 2004, through an investigation conducted by the Citizen Bureau, it was revealed that banks like Barclays and Lloyds were making huge profits by selling PPI. This hard-sale practice became widespread and in 2005, Citizen Bureau filed a complaint and challenged PPI providers that further directed compensation payments to consumers, with an intention to curb mis-selling of PPI.

Why and how was PPI mis-sold?

Due to the lucrative benefits involved in the selling of PPI, banks and even third party brokers were encouraged to be more aggressive in selling PPI policies. This led to the widespread use of fraudulent selling tactics.

Sales staff were highly incentivised for selling PPI policies, leading to a mis-selling spree. Most people were sold PPI without them even knowing what they are buying. It was even sold to people who were not even eligible to claim from it when the need arose.

ppi refund - lloyds scandal


At times, people went to the bank to take out a loan, car finance or credit card, and sales staff bundled PPI into the loan as “protected measure” without the borrower being made aware about its costs.

When asked about it, many customers were made to feel that taking out PPI enhanced their chances of being approved for the loan. PPI was also in many instances sold to people who were retired or facing medical conditions, which would have excluded them from claiming on it in the future.

How did the PPI scam unfold?

In 2004, it was revealed that two major banks, Barclays and Lloyds, were the main culprits for mis-selling PPI. It prompted a series of complaints and events leading to increased demands for an investigation.

In 2005, the report of an investigation conducted by the Citizen Bureau led to the submission of a fourfold charge sheet against lenders selling PPI policies. This report created a lot of pressure and brought unwelcome media scrutiny on banks and financial firms involved in this scandal. The report presented some of these prominent conclusions:

  • PPI policies were highly expensive due to the premiums that totalled up 20% of the overall cost of a loan or mortgage. In the worst cases, this premium amount was augmented by 50% of the overall loan amount.
  • PPI policies were found ineffective since they imposed a structure within their terms and conditions that limited the chances of payout to anyone who was indisputably ill.
  • PPI was mis-sold on a large scale to customers who were not informed about the terms and conditions of the policy they were about to buy. These policies were bundled up into their loans or mortgages, taken out or sold as an “essential” add on. In most scenarios, it was sold without the customer’s knowledge and even to those who would never have been able to claim for it when needed.

In 2005, the FSA (Financial Services Authority) highlighted the PPI scam as one of its primary responsibilities.

The FSA has been imposing fines on culprit banks and financial firms. It began with Regency Mortgage Corporation, who were handed a £56,000 penalty for PPI mis-selling. The FSA stated that Regency was mis-selling PPI to “right-to-buy” mortgage customers, who were already insured or to those who would not have been able to claim and ended up paying heavy premiums for worthless insurance cover.

Later, FSA headed forward to identify more culprits. In 2008, Liverpool Victoria Banking Services were fined £860,000 for bundling up PPI into customer’s loans and mortgages without their knowledge.

Next, Alliance & Leicester (now Santander) were found training their staff to implement mis-leading tactics on customers who challenged the inclusion of PPI into their loans and mortgages. Therefore, they were fined £7 million by the FSA.  

Santander group - ppi refund


Additionally, the FSA took the decision of banning ‘single premium’ PPI, which was one of the worst types of PPI policy sold to mortgage-buyers. It was added to their total loan amount at the start, consequently increasing the overall loan amount and interest paid.

This scandal became more controversial when 33% of PPI customers were sold worthless insurance. Even though, people knew about mis-selling PPI tactics by then, staggering numbers of PPI policies still continued to be mis-sold.

Moreover, sales staff were put under pressure by banks to convince people to take PPI, which made them sell it to people who did not want or need it in the first place. Several sting operations were conducted during this period, and one of them revealed that the salesperson at Lloyds allegedly sold the PPI policy without the consumer’s consent.

Ever since the PPI mis-selling came into light, there has been a tug of war between the banks/lenders and the people lined up to get the compensation.

The Financial Conduct Authority (FCA) has imposed a deadline on customers, which is dated to be August, 2019, meaning they have to make a claim by this date otherwise their claims won’t be considered.  

Although a lot of PPI mis-selling victims have been compensated so far, yet there are many still who have still not come forward.

How many customers did the PPI scandal affect?

According to an FSA report, the number of mis-sold PPI policies had risen to 53 million, out of which the banks alone sold around 45 million policies, along with loans and mortgages by implementing fraudulent sale tactics. When the worth of these policies was calculated, the figure was found to be around a staggering £44 billion.

FCA initially estimated that around 3 million people were affected by PPI scam. But later, by January 2016, nearly 12 million customers were found to have received claim compensation, totaling £24.2 billion. Banks, undoubtedly, had made huge profits out of this financial scandal they’re still not compensating the victims appropriately.

How can I tell if I have PPI?

The PPI scandal has drastically affected the UK population. And since huge number of policies were sold in a variety of ways since the 1990s, it’s very possible that you might have been one of the victims.

Do you recall visiting your bank to take out a loan or mortgage, and having a conversation with the sales staff regarding ‘cover’ or ensured repayments? If yes, then there’s a possibility that you may have been mis-sold PPI, especially if it has happened before 2012 when PPI was still being sold.

Also, just because you don’t recall sales staff mentioning about PPI while providing you a loan or credit card, it doesn’t necessarily mean that you were not sold it unknowingly. One of the ways to find out it is to go through the original paperwork you signed at the time of taking out any of the following:

  • Credit cards
  • Personal loans
  • Mortgages
  • Secured loans
  • Dealership car finance
  • Store cards
  • Catalogue credit
  • Monthly-paid insurance
  • Overdraft

Check if your bank statements reflect any extra charges or if your original policy document includes similar names for PPI, like:

  • Accident, sickness and unemployment (ASU) insurance
  • Protection plan
  • Credit insurance
  • Credit protection
  • Account cover
  • Loan insurance
  • Loan protection
  • Loan repayment insurance
  • Mortgage payment protection insurance (MPPI)
  • Payment cover

In worst case scenarios, if you don’t have the original paperwork, contact your credit provider and ask for a copy of the original documents. Also, you can ask them if they had bundled up PPI on your loan/credit card. Remember that PPI was last mis-sold in 2012, so if you had taken a loan before that time period, only then you are eligible to demand for a potential claim.

What do I do if I find myself a victim of the mis-selling scandal?

If you find yourself the victim of this scandal, ask yourself a few questions:

  • Were you aware while buying it?
  • Did anyone pressurise you into buying it?
  • Did the terms and conditions of the policy cover your circumstances?
  • Did you actually need a PPI policy?

If you have a strong reason to complain against PPI mis-selling, you can get in contact with your bank or lender. They will likely respond to you within 5 working days to notify that they have received your complaint. But it takes 8 weeks for appropriate action to be taken, so if you have not received anything from your bank yet it is best to wait it out. If you are still unhappy with their resolution or hear nothing from them, you can directly contact the Financial Ombudsman Service to help resolve your claim positively.

Another effective way to check if PPI was mis-sold to you is through our Free PPI check tool.

We as a Claim Management Company (CMC) provide free of cost PPI check up services to offer a helping hand to all PPI victims. You just need to provide basic information and we will check with your bank on your behalf. Even if you do not remember your account number, you can still find out about any PPI mis-sold to you by using our services.

Once we are certain about you being mis-sold PPI, we can even make a claim for compensation to the bank/lender that sold you the policy.

What do I do if I don’t remember who my lender was, or not sure if I even had a loan or credit card?

We have seen lots of people being concerned about reclaiming PPI, either due to missing details or due to not remembering any such policy being sold to them. However, there is still a high chance of you being mis-sold PPI. Here’s what you can surely do:

Don’t know if you even took out PPI? Check your credit files

Not knowing about being mis-sold PPI is actually quite common. If that’s your case, firstly, you need to look at all your old loan and mortgage statements. And then, check if there are any details of an insurance fee, or product to cover your payments in case you lost your job through accident, unemployment or illness. You even need to check from the list of aliases that PPI could’ve been sold under, as mentioned above.

In case you have lost those documents or forgot about the lender from whom you’ve borrowed a loan or mortgage in the past, don’t stress out. You can check your credit report online, which shows you entire details of loans, mortgages or other debts you have taken and were ‘live’ within the last six years, even if you don’t have it anymore. Any details before the six year time period won’t be available, so you’ll need to find those details elsewhere.

The credit report won’t provide details about having PPI. To confirm that, you’ll need to ask your lenders you find listed in that report or you can leave it to us. And with our online tools, you can find out if you had PPI.  

You know you had PPI and know the lender too but don’t have the paperwork? Contact them for details

Reclaiming money from mis-sold PPI without having the necessary paperwork can be one of the biggest challenges that many people will face. But you don’t need to panic at all. You can still get a hold of it.

Previously, the process of claiming your money was a bit more difficult for people who couldn’t remember their account numbers. However, with the help of claim companies, the process has changed now. Now, it has become easier to claim PPI without paperwork and without account numbers.

In case you have lost a copy of your agreement or T&Cs, contacting your lender to get a copy will keep you on the safer side. Ensure that the T&Cs are dated back to the time of your agreement, since it changes over time. Your queries depend on whether your account is still active or closed.

If your account is open, you are liable to pay £1 to your lender to get a copy of your agreement but not everyone does so. Also, you can provide a £1 cheque to get it done fast.

If your account is now closed: In this case, ask for a complete breakdown of your whole account, specifically the insurance. If this process takes more than 40 days, you can further report it to the Information Commissioner.

Got old bank paperwork but don’t know if it has PPI attached?

For this, one of the simplest ways to know for sure is to contact your lender. They can provide information on whether you’ve had PPI at all. Depending on your policy age, some lenders ask only for your name and address, while others may need more details. Although having the original agreement and term papers makes the process easier for you.

Under the Data Protection Act, for open accounts, you can legally ask the lender for your agreement for £1. Whereas for closed accounts, it gets difficult for the lender to find your PPI policy terms, and thus, process your complaint further.

Contact your credit provider and provide them with as much detail as you can, or simply ask for a full statement of your account, which will just cost you £10.

How far back can I go?

There are more chances of a successful claim if your PPI has been sold to you and you were making payments for it in the past six years or three years. For instance if you had taken out a loan during the 90’s and were paying premiums of the policy five years ago, you can make a claim. A claim can be made at any point in time, but there are certain guidelines listed below to help you out:

Insurance started in the last six years: 

This is win-win situation for you, as we can’t see any issue here. Simply by going back six years, you can ask your lenders to provide you complete information. Even if you have paid the loan, you can make a reclaim.

If older insurance is still active, or expired within the last six years: 

Here too, you can ask for a reclaim as there is a six-year statutory time limit that applies to active insurance. A policy, for example, that was taken out 12 years ago but was paid till five years ago, is considered as active within the key six-year period.

If it is more than six years since your PPI has expired

In such cases, your credit lender from whom you had taken out the policy is no longer liable to keep any records that are over six-years old. Since, there is no official “cut-off” time you still can make a claim, provided that you have all the paperwork. However, the success rate is a little lower with older loans.

If it is more than 3 years since you think you have been sold PPI

Generally, the Financial Ombudsman rejects the case if it can be proven that you already knew about the problem for more than 3 years. In such cases, however, claims could be made. But if your complaint gets rejected, you can’t escalate it further.  

Can I claim for PPI more than once?

Of course you can, but only if you have been sold more than one policy. You might’ve used banks to apply for multiple financial products – whether it be a loan, insurance, mortgage or a credit card. An average person generally applies for one mortgage, but carrying 3-4 credit cards isn’t abnormal.

So, say you’ve taken out multiple credit cards from the bank, and want to check for mis-sold PPI on them. Take each of the credit cards or loans into consideration and review every document carefully. They might differ slightly from one another and might have PPI attached to most of them.

Do not treat all the cases the same, as the terms and conditions for multiple loans or credit cards will differ. The policy you have would determine if you could make more than one claim or not.

If a policy cover, for example, pays out for critical illness, it may end automatically and you would not have to pay premiums. But if you are eligible to make further claims down the road, you will have to pay premiums to keep the policy in place. With this in mind, consult a CMC like us or look through all of your documents manually.

Can I reclaim if my lender has gone bust or has been taken over?

If your lender has gone bust and you were mis-sold PPI, you can still reclaim by contacting the Financial Services Compensation Scheme, provided that the lender was FSA/FCA regulated. This official body covers all the liabilities of redundant insurers and helps you with reclaiming PPI.

ppi refund - fscs

For instance, if the original lender has been taken over, generally new owners are liable to pay off the old company’s debts and liabilities. In a few cases, the old provider still owns the liability, but complaints are made to the new firm only. For example, Barclaycard has taken over Egg’s credit card. Therefore, they’re handling Egg’s past PPI mis-selling cases.

Can I make a claim if I’ve been declared bankrupt?

Yes, you can. Your financial status is irrelevant to whether you were mis-sold PPI or not. However, it is useful to be aware of any refund that could be recovered though your loan provider, as they may try to refund less than what they owe. There is always a chance of showing the certificate of IVA completion to prove this argument invalid.

Claiming for PPI mis-selling after being bankrupt

While you are bankrupt, the policies that were mis-sold to you before bankruptcy or until the insolvency order came out, will remain as a part of your estate. The potential claim that you will receive must be paid to benefit your creditors.

It simply means that you can’t keep the funds as it is still a part of your bankruptcy estate and you are obliged to inform official receiver or your Trustee. Not informing on the other hand could be viewed as non co-operation that may extend your bankruptcy or may even be counted as a criminal offence.

Making a PPI claim after you are discharged from bankruptcy

Since discharge, you are allowed to keep most of the payments that you receive through the claim. Inheritance payment or a lottery win, for example, can be kept in full.

However, there is a different perspective for the compensation payments you receive after being discharged. You are still liable to hand over this compensation payment to your Official Receiver. Since you were mis-sold PPI before bankruptcy and hence the opportunity of claiming that has already existed during the procedure, it’ll be considered as unrealised asset and must be paid to your old OR.

If the claimed PPI was not part of your bankruptcy

You might have been mis-sold PPI on a debt that you repaid entirely before bankruptcy. Though this debt was not included in the bankruptcy estate, the compensation payment you will receive against this debt will be considered as “unrealised assets” and is still payable to the OR.

Should I make a PPI claim after being discharged from Bankruptcy?

Of course you should, as there is no reason to not make a claim if you have been mis-sold PPI, provided the compensation amount will directly benefit unpaid creditors and not yourself.

In some instances you might feel a responsibility of returning funds to your creditors through making a claim for PPI mis-selling, or not. With this in mind, it is entirely your call whether or not you want to claim for a PPI refund.

Can I reclaim PPI on behalf of a deceased relative?

Generally, people nominate only their parents or a family member to make a reclaim for the PPI they had taken out in the event of their passing away. The arduous task of going through paperwork, however, doesn’t mean the end of the compensation they were supposed to acquire.

In order to reclaim, you need to provide the proof of your relationship to the deceased as well as their death certificate as an evidence of their death.

Have you been ‘Plevined’?

Plevin is a new mis-sold PPI category, which means that if you have got a loan or credit card from a bank or building society and have PPI attached with it, you were simply mis-sold. The landmark Plevin ruling made by the Supreme Court now means that many customers who have had their PPI complaints rejected in the past are now eligible to file again and claim for compensation.

The deadline clock is ticking, and with this new rule, millions of people have been given new hope to reclaim. And for this reason people are reclaiming some of the cost for just having had a policy, and subsequently banks have started paying average payouts in the range of £1,375.

ppi - payment protection insurance for the plevin ruling


Let us give you an overview about Plevin. A customer named Susan Plevin filed a complaint in 2014, for not being told about the high commissions (71.8%) taken from her as PPI payment and demanded a full compensation. The court ruled in her favour and this is now known as the Plevin ruling.

Under this rule, if your lender takes over 50% of your PPI’s cost as commission, and it wasn’t disclosed earlier, you are owed the extra money above that cost. Shockingly it was found that banks were taking on average 67% commission on loan PPI from insurers, and they had never mentioned it – so people are owed billions more pounds.

But some may need to claim even earlier than the deadline

When FCA pressurised banks and financial firms between 2013-2015, they contacted around 5.5 million people believed to be at the risk of either having being mis-sold PPI and who had not yet claimed.

If you were contacted, offering redress or a warning, you might be owed money. Also, FCA has confirmed a three-year deadline to make a claim from when this letter was received, rather than 29 August 2019.

But whatever the circumstances are, it is better to make a claim as early as possible, as the process is likely to become more time consuming as the deadline approaches. In case you have missed the three-year deadline since you have received the letter, you can make a claim for a Plevin payout.

Am I eligible to file for a PPI claim?

Once you ascertain that you have had a PPI policy along with your loan or mortgage, check the criteria required to file a claim. FCA has launched a set of guidelines which decides the consumer’s eligibility to claim a PPI refund. If one or more of the following applies to you then you’ll be entitled to reclaim your PPI payments:

  • If your bank or financial firm from where you have taken out a loan or mortgage charged high commissions while selling PPI policy and didn’t provide any information about it.
  • If you were not aware about PPI policy being optional, and the credit lenders sold it as ‘compulsory’ to provide your credit card, store card, loan, mortgage, car finance, or overdraft.
  • If you had no clue about paying the interest on PPI policy along with the loan.
  • If your credit lender had misled you by saying that you will have to pay a lower interest rate upon buying a PPI policy along with the credit products.
  • If you were not informed about the PPI policy being added to your loan or credit card agreement
  • If you had been mis-sold despite knowing the fact that you were not covered under PPI. For example, if you were unemployed, self-employed, retired or had some pre-existing medical issues.
  • If they promised to process your credit application faster upon taking a PPI policy.
  • If you were not informed that PPI policy could end even before the credit policy or before the loan gets repaid.

Is PPI a monthly payment?

For most personal loans, the PPI cost is usually around 10% of your loan repayment, and the payments for it are monthly if your loan repayments are monthly as well. So, if you had paid off all your credit card balance on a monthly basis and have PPI attached to it, you might have paid for PPI monthly as well.

Case study of PPI claim cases: how the FOS comes to a decision

Let’s look at some of the cases that could be relevant to yours:

Case 1: Mr A- “advised” sale of a monthly-premium payment protection insurance policy – complaint not upheld

This is a case study about Mr. A, who visited one of the local branches of a financial organisation in early 2007. He applied for a credit card and monthly payment protection policy together. At that time, the introductory interest-rate offer was announced. So, he decided to transfer his existing £3,000 balance from another credit card to the new account to take advantage on balance transfers.

Later, when the PPI scandal came into light, Mr. A read about PPI complaints in a newspaper and checked all his documents he was provided along with his credit card. He complained that the financial business misled him by making him believe that he was actually required to take out PPI with the credit card. He added that if he had known that the PPI policy was optional, not a necessity, he would have never taken it out.

Mr. A filled the questionnaire setting out his recollection of events. Also, the lender asked for a copy of his sales file, including copies of the application form, terms and conditions policy, and a policy information pack.

With the evidence presented by both sides, including Mr. A’s comments about what all actually happened, the lender was found clean. And therefore it was evident that they had not misled Mr. A to take out the policy.

It was found that their application form and sales process was designed to make the customers aware about the PPI being optional.  

Also, during the process of taking out credit card, Mr. A had completed and signed the application form which required him specifically to select the additional PPI feature. In fact, he had signed a separate box to confirm his assurance. And the policy information pack that referred to “optional payment protection,” cumulatively verified the arguments of the lender.

As part of his complaint, Mr. A said that he thought he was required to take out the policy and didn’t know if it was optional. But he failed to provide any reasons for considering this.

To counter the situation, it was considered doubtful that the adviser would have told Mr. A to take out the policy compulsorily – or that Mr. A would have thought this was the case. But it was satisfying that the financial business had recommended the policy (which he accepted) and ensured that it was suitable for Mr. A.

The FOS checked if the features of policy made it a suitable recommendation for Mr. A’s needs and found that it was an unsuitable recommendation for Mr. A, for reasons such as:

  • No one suggested to Mr. A that he was ineligible to claim the benefits payable under the policy. In addition, he was in full-time employment and did not have any known pre-existing medical conditions. So, he didn’t have any reason to think that he was not eligible to make a claim.
  • Mr. A claimed that he purchased the policy as he thought it could help him. He was working on a car assembly line, and hence, could not see any immediate threat to his job. But he was worried about his long-term employment prospects. Also, his employer did not provide him with any sickness cover.
  • The FOS decided that Mr. A maybe thought that it would become difficult for him to keep up his credit card payments in case if he would be unemployed. And this might’ve led him to take out PPI.
  • Also for each £100 of the statement balance, insurance costs 79p to be paid each month for 12 months, which later provided a benefit of 10% of the statement balance during claim. It was noted that this cost was not high and it provided greater benefits when compared to other providers.
  • But it was doubtful if the financial business had told Mr. A about the costs and potential benefits of the policy. And it was later concluded that Mr. A might not have agreed readily if he would have known about the amount he would have to pay each month or that he would have to pay premium during a claim.

However, after taking all the evidence and arguments into account, the FOS concluded that even if Mr. A had fully understood the costs and benefits payable, he would still have taken out the policy, in all circumstances.

Case 2: Mrs. B – “advised” sale of a monthly-premium payment protection insurance policy – complaint upheld

Mrs. B asked for a credit card application form by post from her bank of the last 20 years. She received a personally addressed form with an invitation to apply for credit card having a guaranteed £3,000 credit limit. This form had an included section on payment protection policy which declared that “we strongly recommend you to take out payment protection cover”.

Mrs. B applied for the credit card together with PPI. Later, while reading the newspaper, she discovered an advert of a claims-management company, and later filed a complaint against the bank for recommending her an unsuitable policy.

The bank then provided a copy of the policy documentation included in the application form.

In this case, the FOS carefully looked at the application form content – especially the payment protection section. Also, the longstanding relationship of Mrs. B with the financial firm was taken into consideration, as it led her to believe that the bank was providing her suitable advice in her benefit.

After analysing Mrs. B’s circumstances and the policy features, it was found that an unsuitable recommendation was made to her. In particular, it was noted that:

  • Mrs. B was an ex-employer of the firm and had worked for nearly 25 years, so apparently she did not have any reason to think that she might lose her job.
  • She had earlier received many paid benefits including death-in-service benefit, personal accident insurance, critical illness cover, and permanent health insurance. So, having an additional accident, sickness and life cover provided by the PPI policy was needless.
  • Mrs. B had saved enough to keep herself protected in emergencies through inherited money from her parents. Also, she might reasonably have had other ways to meet her credit card payments, in case she lost her job or was unable to work.
  • Her credit card statements clearly showed that she had used her existing credit card to take the advantage of the consumer credit act protection, for her convenience, while buying expensive goods or services. Also, her monthly payments were paid in full.
  • The insurance provided her a benefit of 5% of the outstanding balance cost with paying 79p for each £100 of the statement balance each month for 12 months.  

Taking all the evidence into consideration, the FOS concluded that the PPI policy was not a suitable recommendation for Mrs. B. The financial business should have recommend her PPI only after recognising her needs, and for this reason the FOS asked the lender to Mrs. B back in the position she would’ve been in.

Case 3: Mrs C – “non-advised” sale of a monthly-premium payment protection insurance policy- complaint not upheld

In 2007, a financial business offered a PPI policy to one of its clients, Mrs. C, who already had a credit card with them, over the phone. She agreed to take out the insurance.

In the following year, when Mrs. C paid for a holiday, she found her account balance significantly increased. She became concerned about the premium’s cost added to her account. She cancelled the policy and complained that she had been wrongly advised to take it out – and the bank poorly explained its costs and other features.

When the bank was asked about what had happened, they informed the FOS that instead of recommending her the policy, Mrs. C herself had agreed to take out the policy. Also, they provided a phone call recording during which Mrs. C had agreed to take out the policy. They listened to it to see what had happened.

They noted that the financial business had not given any advice to her. In fact, the sales executive had explained twice that she could not give Mrs. C any advice, but only information regarding the policy to help her come to a decision.

It was clear that the sales executive had not intentionally given her any advice during the phone call.

Since it was not an “advised sale”, the financial business was not liable to ensure if the policy was suitable for Mrs. C or not. But the financial business was still reminded that had to provide appropriate and clear information about the policy – so that she could make an informed choice while buying the insurance.

It was noted that Mrs. C was provided with sufficient information to make an informed choice by the financial business. Moreover, the executive had checked her age and whether she was in permanent full-time employment – to ensure the eligibility for the policy benefits. Also, the executive explained:

  • Policy’s price, the provided cover and the benefits payable in the event of a claim. When she further asked about the policy cost, the executive had explained the cost based on her outstanding balance at the time.
  • About the policy exclusions, including the information that policy didn’t cover any pre-existing medical conditions.
  • The cancellation period.
  • About the premiums that she would have to pay each month in the event of a claim.
  • The policy’s summary and terms and conditions, which executive has told her that he would send it after the phone call. He reminded her to read those documents carefully.

Based on the phone call conversation, it was found that the bank didn’t mislead Mrs. C with any advice and provided her a fair summary of the policy. Thus, her complaint was not upheld.

Case 4: Mr. D – “non-advised” sale of monthly-premium payment protection insurance policy – complaint upheld

This is a case history of Mr. D who was a self-employed freelance journalist. In 2007, he received mail from a bank with an invitation for him to apply for a credit card, though he hadn’t had any dealings with it previously.  

The invitation from the financial business invited him to take out PPI to cover payments in events of accident, sickness or unemployment. It included policy information for those who wanted to know more.

Mr. D took a decision to apply for a credit card along with PPI as he found it particularly useful due to his irregular nature of work. He had a work history of irregular income before.

Later, Mr. D discovered the restrictions on PPI for self-employed individuals, after discussing it with a mortgage adviser. He proceeded to make a complaint stating that he had been mis-sold the policy by the financial business. He said that he would not have taken it out if the financial business had clearly mentioned the unemployment terms.

After collecting the provided copies of the invitation, application form and the policy documentation by the financial organisation, the FOS examined all the documents. They discovered that they had only provided information about PPI, but there was no recommendation for the customer about the policy.

Since the bank did not advise Mr. D about the policy, it was not liable to ensure if the policy was suitable for him. But it was still the bank’s responsibility to provide Mr. D clear information to help him make an informed choice about the insurance he was buying. The FOS noted that the financial business had not done this.

In Mr. D’s case, the policy terms and conditions stated that if a self-employed person wanted to claim unemployment benefit, it is necessary for his business to “totally and permanently” end trading as a direct result of failure to pay off his debts when due.

It was found the terms and conditions of the unemployment cover were more rigid for self-employed than for employed workers – making it an important consideration for the self-employed workers to decide upon taking out the policy.

For this case, the bank should have mentioned the term to Mr. D while providing the policy information. The term was not highlighted and was simply referred in middle somewhere in the policy summary of a 20-page document.

The FOS concluded that this didn’t give the term sufficient prominence and accepted that if the term had been drawn to Mr. D’s attention earlier, he would never have taken the policy out. Plus, it was not certain if, with this policy, he further would be able to claim for the most likely cause of future unemployment.

The FOS told the financial organisation to reconstruct Mr. D’s credit card to put him back in the position he would have been in, in case he had not taken out the policy.

Case 5: Mrs. E – “non-advised” sale of single-premium payment protection insurance policy – complaint not upheld

In early 2008, Mrs. E decided to apply for a £2,500 unsecured loan for a three year term, together with a single-premium payment protection policy over phone. This was her first unsecured loan that she was borrowing to pay for a new kitchen.

One day, she came to know that her friend’s claim under a payment protection policy had been turned down because of her pre-existing medical condition. She then complained that the lender had misled her about the policy. She informed the FOS that she was dealing with a long-standing knee condition and if she had known about the pre-existing medical exclusion in the policy, she would not have taken it out.

Eventually, the Ombudsman took the recorded the phone call and copy of sales script as evidence. The Ombudsman also examined the policy’s terms and conditions and other documentation sent to Mrs. E after the call with the help of FOS.

After listening to the phone call, the FOS found that the bank had not given any advice to Mrs. E. The sales executive had properly explained at the outset that “this call will not constitute any financial recommendation or advice about what the customer should do and the last decision taken will be your own.” And no evidence was found contradictory to this statement.

Since the lender did not recommend the policy officially – they did not have to ensure if the policy was suitable for Mrs. E or not. But they were obliged to provide fair and not misleading information to Mrs. E, to put her in a position where she could make a choice about the policy after receiving knowledgeable information.

It was concluded that, on the whole, the lender had done this clearly. The sales executive had kept closely to the sales script and mentioned:

  • The significant exclusions of the policy including pre-existing medical conditions exclusion.
  • Calculated the overall cost of the policy for three years term and told Mrs. E that it would cost her £248.25, out of which she had to pay £200 for the premium and £48.25 for the interest.

The Ombudsman was not satisfied with the executive and policy paperwork due to their failure to provide Mrs. E with the cancellation term information clearly. It was noted that the bank didn’t tell Mrs. E that, in the event of early cancellation, she would not receive a “pro rata” refund of the insurance premium and interest costs.

However, after considering Mrs E’s circumstances and the costs involved in case of early cancellations, the Ombudsman was satisfied that it would not have affected her decision to take out the policy in case if she would have known about the things earlier. It was noted that:

  • Mrs. E did not have a history of refinancing, and nothing was found to suggest that she might cancel the policy and re-finance through the term.
  • The loan was taken for a short term that reduces the chances of refinancing.
  • Also, the policy cost was comparably small; the amount difference between a “pro rata” refund and a refund calculated in accordance with the policy terms and conditions didn’t seem to affect Mrs E decision to take out the policy.

Case 6: Mr F – “non-advised” sale of single-premium payment protection insurance policy – complaint upheld

In 2006, Mr F considered applying for a ten-year unsecured loan. He contacted a financial organisation and applied for the same. With this borrowed money, he repaid his credit card debts, which would have otherwise been difficult for him to repay.

In 2009, when complaints about PPI mis- selling went viral, he heard about it on radio and complained about the way the policy had been sold to him. He said that this policy had been mis-sold to him and that he would not have taken it had he been properly informed about it. He was not provided any information about how much he would have to pay – or that he would not receive a “pro rata” refund in case of early policy cancellation.

The financial organisation failed to provide a recording of the original phone call, but they provided copies of the phone sales-script that was usually used while making a sale. The sales executive would have followed this script while talking to Mr F. They also submitted a copy of the terms and conditions and summary of the policy that had been sent to Mr F after the phone call.

The FOS was trying to ascertain whether the financial organisation, in any manner, tried to influence Mr F to take out the policy and whether it provided any incorrect information about the policy.

The FOS discussed this incident with Mr F and he said that the financial organisation had in fact advised him to take out the policy and thus, he accepted to buy it without asking any further questions.

However, the financial organisation refused to accept it. They asked us to go through the sales script that had three underlined reminders to tell the consumer that the financial organisation didn’t advise the consumer to take out the policy and that it was merely providing information.

They also added that calls to Mr. F were being regularly monitored to ensure that its representatives followed the script.

We concluded that it is not necessary that an executive sticks to the sales script and it is possible for them to depart from it. After hearing arguments from both sides, we accepted that there is a possibility that the sale had taken place on a “non-advised” basis.

Our next step was to consider whether information given by the lender was clear and not misleading – to confirm if the provided information was sufficient for Mr F to make an informed choice about the insurance and whether it should be bought or not.

We were not convinced as we noted that the policy terms did not allow for a “pro rata” refund, if Mr F were to cancel the policy after the statutory cancellation period. It was important for Mr F to know about this limitation since he was consolidating debts and taking out a long-term loan.

Also, it was not mentioned in the sales script that the executive was supposed to inform Mr F about the cancellation terms. Nothing suggested that the refund would not be made on a “pro rata” basis. It helped us to arrive at the conclusion that the representative may not have explained these things to him.

Instead, it was mentioned in the script that the executive should direct the consumer to the cancellation terms specified on the ninth page of the terms and conditions of the policy, which is sent to the customer after the phone call. There were no notable terms mentioned in the policy summary.

The Ombudsman accepted that Mr F didn’t acknowledge the documentation term and explanation that he had received. Following were some other observations made:

  • The sales script included the term that policy provided cover for five years. But there was nothing in the script that ensured that Mr F was aware of the implications. These would be, for example, that Mr F would be paying premium interest over the full ten-year term and also that if he needed cover after the first five years, he would have to take out another policy, at additional cost.
  • Mr F was looking for ways to reduce costs. When the FOS calculated, they found that irrespective of the policy’s life cover element, Mr F would have had to claim for at least 56 of the 60 months of the policy, to receive extra benefits on the amount he had paid for the policy. And it was significantly important to affect his decision of taking out the policy. But, the concerned financial business didn’t bring this to Mr F’s attention.

After assessing the evidence, the Ombudsman came to a decision that if Mr F had been provided with the policy cancellation terms and its benefits, he likely would have not taken it out. So, the financial business was told to put him back in the position he would have been in, as if he had not taken out the policy.

Case 7: Miss G – “advised” sale of single-premium payment protection insurance – complaint upheld

After considering all the alternative ways to repay monthly credit cards and loan payments in 2007, Miss G found it difficult to meet her repayments. Thus, she decided to call the financial business to take out a loan in order to consolidate her debts and to reduce her payments.

She phoned and agreed to take out a 15-year secured loan of £60,000 with a five-year, single-premium PPI policy. The financial business added a premium of £14,500 to the loan with interest that she had to pay over the entire term of the loan.

After knowing about PPI mis-selling complaints in 2009, she complained about the mis-sold policy that she had taken out from the financial business. She told the FOS that she was not aware of the fact that she could take out the loan without PPI – or about the insurance cost, particularly if she wanted to cancel early.

Upon asking for evidence, the financial business submitted a copy of a recorded phone call of the conversation with Miss G, along with the copies of policy terms and conditions and other documents sent to Miss G after the call. Also, the financial business agreed that Miss G had taken out the policy after its recommendation. Now, the Ombudsman had to consider some facts, particularly:

  • If the financial business adequately ensured that the recommended policy was suitable for Miss G and if it highlighted any shortcomings or not; and
  • If Miss G was provided with the sufficient information that clearly put her in a position where she could decide about the insurance she was taking out.

Having listened to the call, the Ombudsman noted that it was not specifically mentioned to Miss G that the policy was optional. It could be understood why she decided to take out the policy.

The executive had included the PPI cost while providing the estimates on monthly cost-quotations though he had not discussed about it earlier. Also, no quotations without insurance costs were provided. In fact, he had misled Miss G by saying that “one of the greatest things that the loan provides is included protection all built in to the monthly cost.”

However, the term “optional payment protection insurance” was included in the paperwork sent after the phone but the Ombudsman decided that it was unlikely for Miss G to take that into account especially after the phone conversation she had with the institution.

Then, on examination of current circumstances, whether the policy would have been profitable for Miss G and after considering all the facts, the Ombudsman did not think it was. It was noted that,

  • Miss G was looking for ways to consolidate her debts. So, in such a case, she would want to cancel the policy early and therefore required a flexible policy. But if the customer opts out of the policy before its maturity they are not entitled to a “pro rata” refund, making this policy highly inflexible.
  • As mentioned earlier, Miss G had been struggling to cope up with her financial expenses and thus, wanted to reduce her expenses. She told the executive that she wanted to enroll for the cheapest option. But this policy added extra premium costs of £140 per month and thus, significantly increased the monthly payments.
  • It was calculated that in order to gain extra benefits on the total cost that she had paid, she would have to claim 45 out of the 60 months of the policy
  • These were critical pieces of information that could have affected Miss G’s decision to take out the policy. But the executive didn’t bring these shortcomings to her attention. Instead, he focused on the 50% premium refund that she would receive if she never made a claim on the policy.

After looking at all the evidence and arguments, the FOS concluded that Miss G hadn’t completely understood the nature of the single-premium arrangement or the associated costs and the executive hadn’t provided her with this important information either.

However, the documents that Miss G had received after the phone call included some information about the policy costs, cancellation terms and the potential benefits. But since it was not clearly specified it is only natural for her to place her trust in the advice she had received by the executive during the phone conversation.

After giving it considerable thought, the Ombudsman found that although the executive had explained about the five-years cover over the 15-year term he had failed to mention its implications – namely, that she would have to pay interest over the full 15-year term and that if she wanted cover after five years, she would have had to take out another policy at additional costs.

By and large, a decision was reached that if Miss G had been informed that the policy was optional over phone, or if the executive had clearly highlighted its shortcomings, she would have changed her mind about taking out the policy. In addition, the policy was highly inflexible and was not worth the money given her circumstances.

Lastly, the financial business was told to put Miss G back in the monetary position she would have been in, if she had not been advised erroneously.

Case 8: Mr. H – “advised” sale of single-premium payment protection insurance – complaint upheld

In late 2007, Mr. H called a financial organisation to apply for an unsecured loan together with a single premium payment protection policy. Mr. H had made use of such credit in the past for both his personal and business banking.

In 2009, when the news of PPI mis-selling went viral, Mr. H complained that he was wrongly advised to take out the policy – since he didn’t find it to be worth the money and thought it wasn’t suitable for his circumstances.

The financial business refused to accept that it had given any advice to Mr. H about the policy. As evidence, it provided a copy of a recorded phone call, along with a copy of the policy’s terms and conditions and other documents that were sent to Mr. H after the call.

Having listened to the call recording, the Ombudsman found that the financial business had recommended to Mr. H that he take out the policy. Thus, it was reasonable for him to think that the financial business was providing him with the right advice to take out the policy because of the long-term relationship he had with them, even if that was not its intention.

Also, the Ombudsman noted that during the phone conversation, at the outset, the executive had read out a scripted statement at a fast pace to mention that she was not authorised officially to provide any recommendation or advice. But over the course of the call, the executive had prompted the customer to take out the policy, which the Ombudsman accepted Mr. G had reasonably relied upon:

  • The executive had repeated twice that “it might be a good idea” for him to take out the policy along with the unsecured loan.
  • Mr. H was not sure and had asked the executive’s advice about what he himself would do in such situation. He answered, “Personally, if I were in your place and in your circumstances, I would have considered taking out the protection along with the unsecured loan.”
  • When Mr. H said that he was finding the policy to be “expensive”, the executive replied, “Well, you run a small business, right, and for small business it is critically important to be covered, right? As you never know what can happen. And in such circumstances, only a cover can protect your payments, even if it costs a bit more. So if security is your primary concern, it’s probably the right thing to take.”
  • Also, the Ombudsman noted that Mr. H had a long relation with the financial business, so it knew all his personal details and banking history already.

On further analysis of Mr. H’s circumstances and whether the features of the policy were suitable for him, it was found that the policy was not right for him. In particular, the Ombudsman noted that Mr H was a self-employed car mechanic. Being self-employed automatically made him ineligible to claim unemployment benefit. So it appeared that the financial business didn’t provide accurate advice.  

After taking all the arguments and evidences into consideration, the Ombudsman concluded that the financial business should have taken steps to ensure that its recommendation was actually suitable for Mr. H’s needs, and that if it had pointed out the shortcomings of the policy, Mr. H wouldn’t have taken out the policy.

So, in conclusion, the financial business was told to put Mr. H back in the position that he would have been in, if he had not been ill advised about taking out the policy along with the unsecured loan.

Should I reclaim PPI alone or employ the services of a PPI Claim Management Company?

One of the biggest dilemmas that the customers face is “how should they attempt to claim a PPI refund?”

Should they claim it by themselves or with the help of a third-party claim firm?

It is always better to consider both pros and cons of attempting to make a claim individually and or through a Claim Management Company (CMC) before undertaking the task.

When reclaiming through a company:

Filing a form with CMCs makes the procedure mostly hassle-free for you, as their specialists are well familiar with the procedure and associated nuisances. Their specialists can help you with the latest information regarding the policy or the issuers, further ensuring your claim processes much quicker.

In addition, the amount of time required to settle your PPI claim also gets reduced and you get your compensation payment faster.

In some instances, where people have held a PPI policy for a number of years and continued to pay premiums, the financial return you will get would be large enough to justify employing a claims professional, so whatever fees may be charged, will be comparatively minor in comparison to the overall refund.

When you claim for PPI yourself:

In this approach, the obvious potential benefits of filing a claim individually is that it will eradicate the need of paying additional expenses in regards to paying a claim company to take their services. Since the fees incurred could be quite significant, it may leave you with little financial compensation at the end of the process.

Simply, if your case is clear-cut and you have enough evidences already, then look at your PPI reclaim letter and make a claim yourself first. In case you need any guidance, FOS staff will help you.

The decision is ultimately depends on individual circumstances and the way policy was initially presented. If you choose to pursue a claim on your own, understand that it might take significant time and effort. Otherwise, scheduling a no-obligation appointment with a PPI Claim Management Company like iSmart is a better option as we take care of everything from finding out the presence of a mis-sold PPI policy to making a claim for refund.