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Consumer Rights.

How to reclaim mis-sold PPI for free

If you missed the 11:59pm on 29 August 2019 PPI claim deadline, you can now only start a claim in 'exceptional circumstances'.
Which?Editorial team

Key Information

What you need to know

  • If you made a claim before the deadline and it was rejected, you still have the right to appeal.
  • If you’ve missed the PPI claims deadline you could still make a claim, but only in exceptional circumstances.
  • Don’t miss out, claim back tax on your PPI payout.

What was PPI and how was it mis-sold?

Payment protection insurance (PPI) is an insurance product sold alongside credit cards, loans and many other finance agreements. It’s meant to ensure that payments are made if the borrower is unable to make them due to sickness or unemployment.

But huge numbers of policies were mis-sold because the policyholders would never have been able to claim on the insurance.

If you had any kind of credit product, such as a consumer loan, store card, credit card or mortgage up until 2006 you could have been mis-sold PPI (payment protection insurance). Some mis-selling may even have taken place after this date.

The deadline for submitting a mis-sold PPI claim to your bank or financial provider was agreed by the banks and financial regulator and came into effect at 11.59pm on 29 August 2019.

1 How to make a PPI claim if you’ve missed the deadline

You can still apply if you’ve experienced exceptional circumstances, for example:

  • a serious illness which prevented you from complaining on time
  • a bereavement before the deadline which prevented you from complaining on time
  • caring for a sick relative which prevented you from complaining on time
  • a technical error on the website you’re trying to submit your claim from prevents your claim from being submitted

Exceptional circumstances claims will be assessed on a case-by-case basis, so make sure you include as much information as possible when you make your claim.

Keep all of your compensation, and send your extraordinary circumstances PPI claim direct to your provider.

You can use our template letter to make an exceptional circumstances PPI claim.

If your provider agrees that exceptional circumstances led to you missing the deadline, it will progress your case.

If you disagree with the assessment of your provider, you can ask the financial ombudsman service (FOS) for a second opinion.

  • If you can’t remember who your lender was, check your credit file, which you can do free of charge.
  • You can also check the provider list on the FCA website for how best to contact your provider.
  • If the bank, card or service provider which mis-sold you PPI has ceased trading, you can also check the FCA provider list to see which business took over.
  • If you don’t know which company, or can’t find whether another business, has taken over the responsibility for PPI complaints of the firm that mis-sold you, contact the FSCS. The FSCS deals with firms which have gone out of business, but which haven’t had their debt taken on.

2 What to do if you made a PPI claim before the deadline but it was rejected

Your claim will be assessed by your PPI provider, who has up to eight weeks to resolve your claim from the date you made it. But you could get a refund as early as one week after your initial claim.

If your provider takes longer than eight weeks to get back to you or it rejects your claim, you can appeal to the Financial Ombudsman Service for free. You have up to six months from the date your provider rejects your claim to take your complaint to the FOS.

3 How to appeal if your PPI compensation claim is unfair or rejected

Regardless of whether you made a claim before or after the deadline, if your claim is rejected, or if you’re not sure whether the amount you have been compensated is correct, all is not lost.

1. If your complaint is rejected or you're told the bank needs more information  You can either take your complaint straight to the free Financial Ombudsman Service or you could use the provider’s ‘subject access request’ form, which can be requested for free.

This form should give you all the information the provider has about you and the products you’ve had with them, for at least the past 6 years. You should receive a response within 40 days.

2. If you think the amount of compensation is unfair  You should check the factors that can affect the amount you get. For example, did you make a claim on the policy, or do you owe the bank money?

You should also check the assumptions the bank has made. If your bank needed to make any assumptions to calculate your offer, it will have been explained in your letter.

In most cases if you think anything is incorrect or that you have been unfairly treated, your first port of call should be your bank.

3. Appeal to the financial ombudsman If you still don’t think the bank’s final resolution is fair, you have the right to contact the free Financial Ombudsman Service (FOS) to ask a question or challenge your bank’s decision.

There is no cost involved, and as many as two in five PPI claims referred to the FOS are successful. The process is straightforward but due to the volume of PPI complaints it can be slow.

4 What is a fair PPI compensation payout?

If your complaint is upheld, then the company that sold you the policy should do its best to put you back in the position you would have been in if you had never taken PPI out in the first place.

This is to make up for the fact that you haven’t been able to use the money during the time you held the PPI – after all, you might have saved or spent it elsewhere.

Understandably you want to know how much you’re owed, but the sums involved can be tricky. Regulators require your PPI provider to put you back into the financial position you would have been in if you had never had PPI.

There are three sums that make up how PPI compensation is calculated.

  • First, the actual cost of the premium, this could have been added as a regular monthly charge on your loan or credit card repayments.
  • Second, how much interest you were paying on the premium. This can add up quickly, especially  if you had a product with compound interest.
  • The third and final sum is simple interest of 8% a year on the combined premium and interest for the time you had the policy.

Key Information

PPI compensation: jargon buster

  • Regular premium policy If you have a regular premium policy, such as those attached to mortgages and credit cards, then you should receive a refund of any PPI premiums paid by you and, if applicable, a refund of any additional interest charged to you because of the PPI.
  • Single premium policy If you have a single premium policy, such as those often attached to personal loans or finance agreements, then the compensation you receive will depend on whether your loan is still in force or not.
  • Loan still in force Your lender should calculate what your loan repayments would have been had PPI not been added to the loan and how much should have been repaid so far. Any overpayments you have made will therefore be applied to your outstanding loan, reducing the amount of capital you owe.
  • Loan no longer in force You should still receive any PPI payments you made, plus the difference between the redemption figure you paid and what it would have been had you never taken out the PPI policy.

5 Reclaim tax on your PPI payout

You have up to four years after the end of the tax year in which you received your payout to reclaim tax on mis-sold PPI.

Which? money advice experts told us: 'If, like millions of us, you’ve made a successful PPI claim, you probably noticed that the payment you received was made up of at least two parts - the PPI repayment and statutory interest on this amount of 8%.

'You should also have noticed that the interest element of the payment has been taxed at a rate of 20%. But what you may not have realised is that lots of us are entitled to reclaim the tax we’ve paid on any compensation since April 2016.

'Since 6 April 2016, everyone has had a Personal Savings Allowance (PSA), which allows most people to earn £1,000 in savings interest tax-free (or £500 for higher rate tax-payers).

Since then, savings interest has generally been paid gross, but PPI payouts continue to 'have 20% tax deducted.

'PPI payouts are taxed in the year you get paid, so even if the policy was mis-sold in, say, 2001, it’s the tax rules in the year you get the payout that counts. So unless you’re lucky enough to have masses of savings and therefore have already used up your PSA, you should be able to reclaim the tax you’ve paid on any interest up to £1,000 (or £500 for higher rate taxpayers).

'Unfortunately, your refund won’t happen automatically. Most people just need to complete a form R40 to apply for a refund. If you do self-assessment, you should include the PPI interest and any refund will be calculated for you.'

The PPI mis-selling checklist

Most of us who had PPI were mis-sold the product so long ago it’s difficult to remember what happened or if you even had it or not. So don’t be afraid to put in a claim

Regulators published an official lists of reasons you could have been mis-sold PPI and if your answer is ‘no’ to one or more of the following questions you were almost definitely mis-sold PPI. But take this list with a pinch of salt as most people don’t remember how they were sold a financial product 15 to 20 years ago.

  • If the insurance was optional, was that made clear to you?
  • Did the adviser tell you about any significant exclusions under the policy?
  • Did the adviser make it clear that you would have to pay for the insurance upfront in one single payment?
  • If you had to pay for the PPI as a single payment, was it clear that the insurance cost would be added to the loan and that you would be paying interest on it?
  • If your loan or finance agreement lasted longer than PPI, did the adviser make it clear that the insurance would run out before you had finished paying for your loan or finance agreement? The adviser should also have told you that you would continue to pay interest on the insurance premium, even after the insurance expired.
  • If you bought PPI after 14 January 2005, did the adviser try to persuade you to take it out by saying something like: ‘We strongly recommend that you consider taking out PPI?’ If so, the sale counts as an ‘advised’ sale and they should have issued a ‘demands and needs statement’ to show why a particular policy has been recommended, and why it’s suitable for you. If they didn’t, this is grounds for complaint.