PPI: How to reclaim your premiums
The payment protection insurance (PPI) mis-selling scandal is coming to a head.
The UK's banks are still deciding whether to apply to appeal against a High Court ruling that they must obey new rules on the sale of PPI.
The aspect they find most vexing is that they are being prompted to contact all past purchasers of this insurance to invite them to lodge a claim for mis-selling.
Millions of people have either paid large one-off lump sums, or monthly insurance premiums.
So what can you do in the meantime if you think you have been mis-sold this insurance?
Thousands of people have already received compensation because they were mis-sold PPI policies, which are supposed to repay people's loans if their income drops because they fall ill or lose their jobs.
Consumer websites such as the Consumer Action Group or Money Saving Expert are places to meet a large number of people with similar problems and huge expertise gained through their own real-life experience.
This is where you will learn the ropes and it is free.
Do not pay much attention to the story that you can only claim for the previous six years.
You are probably claiming for the return of money paid under a mistake.
For money paid by mistake, you usually have six years from the date you became aware of the mistake. So make your claim as far back as you want. You have nothing to lose.
Make a detailed note about how you took out your loan, how you think PPI became added to the package and why you did not react before.
Take several days to put this note together as many of the details of what happened will become clearer as you go over it in your mind.
This will be an important document because this will form the basis of your mis-selling allegation.
Start putting together a very careful assessment of what your PPI policy has really cost you.
This will take time and a lot of thought and it will not be immediately obvious.
You have lost your PPI premiums. Claim them back. That bit is easy.
But hang on, if you had not had to pay, say, £5,000 in PPI premiums, then you might have been able to borrow £5,000 less than you did at, say, 15% interest.
It is only fair that you should claim back that unnecessary loan interest as well.
That is not the end of it.
What if the additional mis-sold PPI burden undermined your ability to repay the loan?
Did this lead to you defaulting on the loan and damaging your credit rating?
Did you have to pay more for credit than might otherwise have been the case, been unable to get a mortgage on a house, or even lost your home?
If you are a hoarder, you may already have a complete set of records relating to your loan, especially the initial application.
But for the rest of us, for a payment of £10 you can make your bank disclose the data they hold on you.
You need to send them a Data Protection Act demand for all data relating to your loan and the PPI, which they hold on you in any form. It is called a subject access request.
The consumer websites will generally advise you how to word these demands and may even provide you with templates.
The banks are obliged to comply within 40 days for a payment of £10.
If they are not co-operative, you should include this as part of your complaint.
Make the complaint
At this point you should send details of your complaint to the bank explaining why you want a refund.
Your bank will write back and tell you that they do not have to deal with your complaint before eight weeks have expired.
In fact this period is an industry agreed time-scale and is not legally binding on the bank or on you.
If you feel your lender's response amounts to fobbing you off then there are two courses of action you should consider - going to court or going to the Financial Ombudsman Service (FOS).
Where there is very clear evidence of mis-selling, then you should definitely consider the county court for a cheap, direct, rapid and effective no-nonsense DIY approach.
If you have decided your claim is suitable for the county court process then it will be better if you make it clear to the bank that they have a fairly short time-scale to deal with the matter, perhaps 14 days, before the court papers are issued.
If you have decided to use the ombudsman then you will have to accept the bank's eight-week delay because the FOS will not deal with your complaint until the bank's standard procedures are exhausted.
Going to court
The UK has a superb county court system, especially in England and Wales.
In my view, a county court judge is much more likely than the ombudsman to make a real attempt to make sure that the complainant does not lose out. You do not need a lawyer.
The steps are fairly simple and - on the basis of reports we receive to the Consumer Action Group - your compensation level is likely to be much greater than it would be if you complained to the FOS.
However, the ombudsman says that it would return people who were mis-sold PPI to the financial position they would have been in if they had not taken out the policy.
Clear evidence of mis-selling tends to mean those cases when you were not covered by your policy anyway. That might be because you were self-employed, or unemployed or already retired.
It might even be where the handwriting on your loan application form was not your own.
With small-claims limits soon likely to be raised to £15,000, in my opinion the county court is a better route than ever.
The bank may try to settle out of court, but my advice is to stay resolute until you get the settlement you want.
If the mis-selling is less clear then the FOS may be a better route.
Its website says that it attempts to reach fair solutions as opposed to solutions based upon hard law.
This is probably correct, but the procedure takes a long time - which can be up to two years or more.
Suggestions from reports to the Consumer Action Group say it is never very clear what is happening or what stage the complaint has reached.
If you want to use the FOS, then go to its website, read the guidelines and begin their process. As before, a well-prepared case will always be an advantage.
Fight your corner
Your bank may try to offer a compromise after a year or so.
The chances are that it will not explain the basis of its compensation calculation and the ombudsman will not require it to do so.
Experiences from people contacting the Consumer Action Group show the FOS can suggest that successful complainants sign binding "full and final" settlement agreements based on compensation figures which are then left to the bank to decide.
Unfortunately, if it is merely your word against the banks, then you may have no other choice.
There is nothing to stop you insisting on negotiating your compensation level before you agree anything but this is likely to cause further delay and non-cooperation from your bank.
But stick to your guns. You are not the wrongdoer. It is your bank which has not acted correctly and the FOS tells us that the vast majority of complaints which are rejected by banks and then pursued to the ombudsman are then upheld.
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