Ten things you need to know about PPI

You’ll have seen all those irritating ads on TV asking you if have claimed back your PPI payments yet, but did you know that you make the claim quite easily on your own and save a small fortune in the process? Well, it’s a fact that the banks really have set aside billions of pounds to pay for PPI claims, so here are some facts about PPI that you might find useful.

1. What is PPI?
In essence, there is nothing wrong at all with a PPI policy. It stands for Payment Protection insurance and it is an insurance policy that should kick in, if you are unable to make payments on a loan or a credit card because of ill health or unemployment, and make those payments for you for up to one year.

2. So why all the fuss about PPI?
PPI sounds like it is fine then, right? There’s nothing wrong with the product itself, it makes perfect sense to protect yourself in this the way. What was wrong was the way that it was sold in the past. Firstly, it was ridiculously expensive and sometimes even cost more than the interest on a loan. Secondly, it was often glossed over, or even hidden, by the salesman who was earning big commissions for selling PPI with loans and credit cards.

3. Who should check to see if they have PPI?
PPI has been around a long time, so anyone who has taken a loan, mortgage or any other form credit arrangement, from around the 1990’s onwards, and possibly even earlier, may have been mis-sold PPI. If you are unsure whether you had PPI, or you have lost the paperwork, then you can check with your lender, who will have to give you the details, sometimes for a nominal fee.

4. How much can you claim back?
The TV adverts are not lying when they say that you could be owed thousands of pounds for mis-sold PPI. Typically, the payment protection insurance would have made up 15% of your monthly repayments on a loan. So, if you were making loan repayments of £150 per month, over a five year period, then you could be owed ((150 x 12 x 5) x15%), or £1,350.

5. Can you claim back on old loans?
There is no deadline that you need to meet to claim back and, in theory; you can claim back mis-sold PPI sold to you at any time. There is, however, a rule that says that banks do not have to keep the records of loans that were repaid over six years ago. This doesn’t mean, though, that you cannot claim on older loans, it may just make it more difficult.

6. Do I have to use a PPI claims company?
You are quite entitled to make your own PPI claim and probably just as likely to succeed in getting you’re your money back. PPI claims firms charge high fees for their efforts, some as high as 30% of the money reclaimed. There is a useful guide to how to go about claiming for PPI here from the Money Advice Service.

7. What are my chances of getting some money back from a PPI claim?
The chances of getting your PPI money back are pretty high. Figures suggest that as many as 85% of PPI claims have been successful and the average amount of compensation is around £3,000. Around £9 billion has already been paid out by banks and other financial institutions for mis-sold PPI.

8. So, why do so many people use PPI claims companies?
There is nothing wrong with using a reputable PPI claims company, so long as you are happy to pay the fees, which are very expensive at an average of 30% of the reclaim amount. A claim is not difficult to do yourself and the process is little more than writing a letter or a filling in a form. The only real justification for using a PPI claims company would be if you have difficulties in dealing with such matters yourself. For most people, it would appear that self-claiming is by far the most sensible option. The fact that the PPI claims companies have the big bucks to be able to afford all those expensive those TV ads would probably help to explain why so many people do use the PPI claims companies, who charge such high fees.

9. Can I claim PPI if your loan is in default?
You have to be very careful about claiming for a PPI refund if you are in default on the loan, or the credit card, because the lender is likely to offset a successful claim against your outstanding loan, which you will mean that you won’t receive a penny. If you have used a PPI claims management company, though, they will still charge you their percentage and that could leave you with a new debt to worry about.

10. Who is eligible to make a claim?

Although the TV adverts make it sound like everyone who has ever had PPI was mis-sold it, this is not true.  Anyone can make a claim, but you will need to show that you have good reason to expect a refund. The common reasons are that: The terms and conditions of the PPI were not explained to you properly, you didn’t even know that PPI was included in the repayments, PPI was not appropriate for own personal circumstances, or that you were told you could not have the loan unless you took up PPI.