What is Payment Protection Insurance? - Payment protection insurance (sometimes referred to as “loan protection” or abbreviated as “PPI”) covers your loan or debt repayments in the event that you fall behind in your repayments due to a change of circumstances such as being out of work due to illness, or if you lose your job through redundancy.
Payment protection insurance policies are often sold as part of the deal when consumers take out a loan, mortgage or credit card. It is also possible to buy a “stand-alone” payment protection policy from an insurance company that has no direct involvement with the credit provider.
Missold PPI complaints
Some payment protection policies may have been “mis-sold”, and under these circumstances, you may be entitled to a refund. Examples of mis-sold PPI policies are:
- You did not realise that you were taking out a policy, and it was simply added to the loan without your knowledge
- That you were told that the PPI was compulsory and you could not have the loan without it
- That the policy was not suitable for your needs at the time it was taken out, and would never have covered you in the event of a claim
- That you were self employed, or not working, when the PPI was taken out
- The extent of the policy was not properly described to you, and did not cover you for what you thought it would
What will I get if my complaint is successful?
This does depend on your particular circumstances and the current state of your loan. If your complaint is upheld, then you should be entitled to a refund of the payment protection premiums that you have paid, plus any interest that you have paid on them. This refund can be paid directly to you. However, if your loan is in arrears, your lender will be entitled to apply the refund to the arrears initially, to clear these, and reduce the balance of your loan. You can then usually choose whether the remainder of the refund is applied to your loan, or paid to you directly.
Your lender may offer to rework or rewrite the loan, as if the PPI had never been taken out. This will usually result in the balance of your loan being reduced, as well as your monthly instalments being reduced, as you will no longer be paying the PPI premiums.
You have to remember that if you accept a refund, or reworking of the loan agreement, the PPI policy will be cancelled, and you will not be able to make any claims on it, should you fall into financial difficulties.
How do I make a complaint?
Your first step is to send a written complaint to your lender directly. The following tips show you the best way to make sure that your complaint is taken seriously:
- It is best to put your complaint in writing, and send it by registered post, to ensure that your lender receives it. If you are not comfortable writing the complaint, you could ask a friend, family member or an organisation like the Citizens Advice Bureau to help you. If your complaint is complicated, and you would like us to assist, then contact us.
- Try to stay calm and polite when dealing with your lender. This can understandably be difficult, as you may be very angry and upset with the way that they have dealt with you. However, this will help you to explain your complaint as clearly and effectively as possible.
- Write "complaint" at the top of your letter, to make sure that it is quickly recognised and passed to the appropriate department. You should also make sure that you include details such as your customer or account number, your full name, address, and contact details, to allow them to respond.
- Keep things brief and to the point. Set out the facts clearly and in a logical order. Say why you are not happy and what you want your lender to do about it. This will make it easier for them to look into the problem and sort things out.
- Send with your complaint letter, copies of any relevant paperwork that you have to back up your case.
- Make sure that you keep a copy of your letter, and any documents that you send with it. You may need to refer to them later.
You should then give your lender a chance to respond to your complaint. Your lender generally has 8 weeks to respond to your complaint before you can take it further.
If your lender does not respond within this time, or if they reject your complaint, then the next step is to make a complaint to the Financial Ombudsman Service (FOS). The FOS is an independent body, whose job is to help settle disputes between financial companies and their customers. Their service is free to Consumers, and therefore you do not normally need to instruct a solicitor to handle the complaint for you. However, if your complaint is complicated, and you would like us to assist, then contact us.
You will generally only have 6 months from the date that you receive a final response from your lender, to make your complaint to the FOS.
Details of how to make a complaint to the FOS, and all of the relevant forms, can be found on their website: Financial Ombudsman Service
Compulsory Payment Protection Insurance
If your PPI relates to a loan which is regulated by the Consumer Credit Act 1974, was taken out before 6th April 2007, and if you were told that the PPI was compulsory, you may be entitled to challenge the whole of the loan agreement. This type of challenge does depend on how your agreement is set out, and on how the PPI is referred to on the agreement. It will also rely on your recollection of what you were told about the PPI at the time that the loan was taken out.
If you think that this applies to you, then you should contact us to discuss your case further: 0844 488 9090.