Payment Protection Insurance (PPI)
Loans, mortgages, credit cards or other financial agreements could have PPI attached to them as a form of cover in cases of accident, sickness or unemployment where you could no longer afford to repay your lender.
However, lenders often ignored the guidelines for selling PPI, meaning that many borrowers bought policies that they didn’t want, need or even know they had.
At Gladstone Brookes we have already recovered £920m± for our clients in mis-sold PPI premiums and associated interest.
What is PPI?
PPI is now acknowledged to be one of the largest scandals in UK financial history, with £27.7bn having been reclaimed by customers so far.
It has been described by observers as banking’s worst nightmare because it was mis-sold on an industrial scale to people who didn’t want it, didn’t need it and, in many cases, didn’t even know they had it. Now the lenders are having to pay back billions in compensation.
Payment protection insurance was a good product when sold correctly. It was designed to allow you to meet your payments on a finance agreement if you come out of work through accident, sickness or unemployment.
It was meant to give you the peace of mind, that you wouldn’t fall into arrears with your finances and the product actually performed well for thousands of people. Payment protection insurance was sold as an add-on to loans, mortgages, credit cards and other financial agreements & the problem wasn’t solely with the product itself, but more specifically in how it was sold to people.
Claiming on the PPI Policy
When customers fell ill or were unable to work, they attempted to make a genuine claim on their payment protection insurance product, but ‘exclusion clauses’ often made it impossible to use the product and obtain the expected payout.
Exclusion clauses have been used in insurance products for many years and are designed to prevent insurance companies having to pay out unfairly. However the problem did not lie in the exclusion clauses themselves, but in the advisors that sold the product not checking whether a customers situation (such as medical conditions / employment status) would prevent them from making a successful claim. Research by the Citizens Advice Bureau showed that only 15%-20% of policy holders were able to make a successful claim. The success rate for motor insurance claims is 74% and 55% for household claims.
As with any financial product, the lenders should have ensured proper advice was given to their customers on whether or not PPI was suitable for them. But it has been known for sales staff to have been highly incentivised to sell as many policies as possible.
If proper PPI advice wasn’t given, the policy may have been mis-sold as suitability should have been taken into account at the point of sale.
Pressure selling techniques were often used to persuade customers by playing on their fears of what might have happened in the future. Some lenders led customers to believe it was a compulsory product and was required in order for them to take out the loan they wanted, or that taking out a PPI policy would improve their chances of being accepted.
Some customers weren’t even sold into taking out a policy, the lender simply added it to their loan without even telling them. On top of this, they then charged interest on the up-front premium for the length of the loan. PPI added up front to a £10,000 loan could add £4,000 to the overall cost. If it was taken as a single premium it could put the overall cost up to £16,000!
Exclusion clauses built into policies often made it impossible to make a PPI claim. Sales staff were supposed to make people aware of what those exclusions are. These include:
- those in seasonal or part-time work (under 16 hours a week)
- employed on a temporary or contract basis
- aware of the possibility of redundancy in the future
- having a pre-existing medical conditions
- suffering from stress or backache
- under 18 or over 65
Many sales staff failed to establish whether or not the customer already had cover in place for their credit repayments or if their employer’s sick scheme would cover their payments without need for any insurance.
Many policies have buffer periods of up to 90 days – so the customer would need be out of work for three months before any payments are made. If it’s only a short-term absence, the policy would be useless.
Payment protection insurance has become one of the biggest single financial scandals in British history. Lenders have already paid out more than £27.7bn on payment protection insurance claims and have earmarked further billions to pay future successful claims.
The UK’s banking regulator is the Financial Conduct Authority who became so concerned with the way the lenders investigated PPI claims that they started a major inquiry into the high street banks several years ago to ensure they are following the regulations properly. So far no findings have been announced in relation to their thematic review.
Further information on reclaiming PPI through a PPI claims company.
There are a number of ways in which a policy could have been mis-sold, for example:
- Did the seller ask you questions about your age, employment status or health?
- Were your earnings while off sick guaranteed for six months or more?
- Were any of the exclusion clauses mentioned?
- Were you told that PPI was optional or did you feel pressured into taking the policy?
- Were alternative policies discussed?
- Were you advised of the cost of the premium as a separate item?
- Were you even aware that a policy had been sold to you?
- Were you asked if an existing PPI policy was already in place?
Making a PPI Claim
We have already recovered more than £920m± for our clients & we aim to make the PPI claiming process as smooth as possible. If you believe you may have been mis-sold your payment protection insurance policy, just fill in our PPI claim form online or call us on and one of our friendly, knowledgeable staff will guide you through the process.
Frequently Asked Questions
How do I know if I have it?
If your bank or loan statements itemise PPI as a separate charge then you have a policy. However, this doesn’t always apply; single premium PPI costs are presented up front so may not be as clear. If you are unsure, or cannot locate or understand your statement, call one of our team on.
How can I claim it back?
We have made thousands of successful claims against Lloyds, Barclays, Halifax, HFC and a wide variety of other lenders. Filling out our PPI claim form could help you reclaim any money you may rightfully be owed and make you our next success story. Alternatively, all lenders offer free complaints services, so you have the power to lodge your own complaint.
How much will my claim cost?
We work on a no-win-no-fee† basis. If we do recover your money for you our fees are 25% + VAT of the total redress offered by your lender, including any reduction of any outstanding agreement, which if in place the PPI may be cancelled. If we are unsuccessful there will be no charges whatsoever.
How long will my claim take?
Your claim will start with the Pre-submission stage first. On average within 6 weeks from the request being sent to the lender, a response is received which will determine your PPI status. Then, our average claim timeframe is between 8-16 weeks from the date the lender acknowledges the claim to a decision being made. If your lender cannot keep to this deadline then we will liaise with them in the first instance and, if necessary, present your case to the Financial Ombudsman Service, in a bid to bring your case to a conclusion as soon as possible.
Will my claim affect my relationship with my lender?
Lenders have recognised many of these policies were not right for customers and so reclaiming your PPI will not place any sort of ‘black mark’ on your relationship with the lender.