What is 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.

In 2005, Citizens Advice issued a so-called super-complaint to competition watchdogs about what it described as a ‘protection racket’, starting a series of events that led to the compensation payments to consumers and sales of some types of PPI being banned.

Most people don’t know if they were mis-sold PPI or not. Regulators have recognised this and now recommend that if there’s a chance you had PPI, you should make a claim ahead of the 29 August 2019 deadline.

What is the PPI claim deadline?

The Financial Conduct Authority (FCA) has confirmed that the deadline for making a claim will be 29 August 2019.

This means that if you want to make a PPI claim it must be received by the firm you’re complaining to on or before 29 August 2019.

Some banks have written to their customers, telling them that they may have been mis-sold PPI and should submit a claim.

Anyone who has received one of these letters has three years from when they received the letter to make a complaint. 

As a result customers who receive a letter are warned to act promptly, particularly if it is an older policy, to ensure their complaint does not fall foul of any time limit.

More than 200,000 people have already used the free Which? PPI claim tool to start their claim, and in 2018 we saw an average compensation payout of £2,500 – one person we spoke to received more than £18,000.

Who do I make a PPI claim against?

You can make a PPI claim against the company that you bought the financial product with.

In most cases this will be your bank, but PPI was also mis-sold with financing agreements, store cards and credit cards. 

There is also the added confusion that some companies have been bought by others or are no longer in business.

PPI mis-selling checklist

Here are some of the ways you may have been mis-sold PPI. If your answer is ‘no’ to one or more of the following questions, then you may have been mis-sold PPI.
If the insurance was optional, was that made clear to you?

  • Did the adviser tell you about any significant exclusions under the policy – for example, the exclusion that says you won’t be covered for any pre-existing medical condition?
  • If you took out a loan or finance agreement, 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, did the adviser make it clear that the insurance cost would be added to the loan and that you would be paying interest on it?
  • Single-premium PPI insurance normally only lasts for five years. If your loan or finance agreement was for longer than this, 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.
  • You can complain if you think your provider earned a high level of commission from your PPI and this was not made clear to you when you bought it.

What does Plevin mean for PPI compensation?

The Financial Conduct Authority (FCA) has put rules in place for how firms should handle claims in the wake of the Supreme Court ‘Plevin’ ruling, which looked at cases where providers earned a high level of commission from PPI and customers weren’t told about it.

The FCA now says that if the cost of your PPI was made up of more than 50% commission and you weren’t told this, you should get the difference back plus interest.

But these rules will only officially come into effect on 29 August 2017.

PPI providers will be required by the regulator to write to all previously rejected complainants who are eligible to claim in light of the Plevin case, to explain the new grounds for claims.

As bank loans with PPI typically had 67% commission and banks almost never mentioned it, this means millions more people are owed billions more pounds.

We believe that if you’ve had a PPI claim rejected in the past, you should resubmit it to your PPI provider and can ask them to check for undisclosed high commission, as realistically there’s little to no way you could have possibly known about the amount of commission on the product you were sold.

It’s important to remember that you’ll only be compensated the percentage difference over 50%, so if your product was 67% commission you’ll get the 17% back. In many cases this will probably mean compensation in the hundreds, rather than the thousands.

How much PPI compensation will I get?

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.

  1. First, the actual cost of the premium, this could have been added as a regular monthly charge on your loan or credit card repayments.
  2. Second, how much interest you were paying on the premium. This can add up quickly, especially  if you had a product with compound interest.
  3. 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.

When did PPI mis-selling start?

There's no specific start date,  the problems of mis-selling have been around for a long time. Claims generally start on policies mis-sold from the 1990s and in some cases even earlier.

The financial regulator started fining PPI companies in 2006, but it wasn't until 2011 that we started to see compensation payouts happening on a larger scale.

How can I find out if I had PPI?

You can ask your lender. If you can’t remember who your lender was or whether you were mis-sold a PPI product, you can check your credit report, which you can do free of charge.

Is PPI known by any other names?

If you have the paperwork for any credit products, it may not be called PPI so scan your statements for these names too:

  • accident, sickness and unemployment (ASU) insurance
  • account cover
  • card protection, card protector, credit card repayment protection, credit insurance, credit protection
  • income protection
  • loan care, loan insurance or loan repayment insurance, loan protection
  • mortgage payment protection insurance (MPPI)
  • payment cover, personal loan protection, protection plan
  • redundancy cover

How long can a PPI claim take?

Your PPI provider must resolve your claim within eight weeks. If it fails to do so you can take your claim to the Financial Ombudsman Service (FOS).

The FOS is free to use, but it’s worth noting that, due to the volume of PPI complaints, this process can take a while. In some cases, it may take more than a year to decide. Use our guide on how to take your complaint to the FOS.

How far back can I make a PPI claim?

Firms should investigate any PPI complaint but you’ll have a much better chance of success if the policy was active within the last six years.

Due to data protection rules, banks and lenders are only obliged to keep your financial records for up to six years – some will keep them for longer (particularly if you’re still a customer) but others will dispose of them immediately.

Unless you have documentation proving that you were sold PPI, the claim could ground to a halt if the firm says it has deleted records of your policy.

However, firms haven’t always bothered to investigate claims properly so if you’re not satisfied that it has searched its records adequately, escalate your complaint to the Financial Ombudsman Service (FOS).

Can I make a PPI claim on behalf of a deceased relative?

Generally if there is a will, and a grant of probate has been obtained, then all the executors named as the personal representatives of the estate on the face of the grant are authorised by law to bring a PPI complaint. All the executors would need to sign the relevant forms.

If there is no will, a grant of letters of administration is required and the administrators of the grant become the personal representatives and are authorised by law to the bring the complaint on behalf of the estate.

In terms of the process, what you need to provide would depend on the size of the estate and if the deceased was based in the UK or abroad.

Regular estates  You'll need to provide a copy of the grant of probate, or if there is no will, a copy of the grant of letters of administration.

Small estates (less than £5,000 in England, Wales and NI and £36,000 in Scotland) you'll need to provide written confirmation that the estate is small and you'll also need to supply a copy of the will.

If there is no will, you'll be asked for either a marriage certificate (if you're the spouse of the person who has passed away) or a birth certificate (where there is no surviving spouse) as children, another relative or a next of kin bringing the complaint.

You'll also need to provide a copy of the grant of probate, or if there is no will, a copy of the grant of letters of administration.

Overseas 'grants of probate'  When a consumer has lived and passed away abroad then you can send a foreign grant of probate. Whoever is bringing the complaint must be authorised by UK law. So, you would need to obtain a UK grant of probate

If a foreign grant of probate has been issued by a former colonial country (i.e. Kenya and Nigeria), then that grant of probate can be resealed by a court in England and Wales. You can then apply to have the grant resealed, if you haven't already done so.

What is probate? - a Which? money guide.

Can I make a PPI claim on behalf of someone who is still alive?

In order to make a claim on behalf of someone else you will need permission from that person, or in some cases you may need power of attorney - the legal power to act on behalf of someone else in financial decisions.

What if I can’t find the paperwork?

You can still make a claim if you can’t find any old statements or a copy of the original credit agreement.

Approach the relevant lender and ask any relevant paperwork. Give them any previous names (if you got married) and addresses (if you moved) to help them track down PPI policies you might have had.

If it refuses, you can make a subject-access request (SAR) asking for any information about PPI premiums.

Your bank or credit card provider should also be able to provide old statements to check for evidence of PPI premiums paid.

Should I use a claims-management company?

Claims-management companies (CMCs), also sometimes called ‘claim handlers’, sprung up fast in the wake of the PPI mis-selling scandal. 

They offer to handle your PPI complaint in exchange for a fee. Which? strongly advises that you consider your options carefully before deciding to use a CMC. 

It doesn’t cost anything to make a PPI claim direct to your provider, and you’ll keep 100% of your compensation. You can use our free PPI tool and template letters to do this.

Some firms may offer to help you make your claim for which they will usually take a cut of any money you’re awarded. This can be as much as a third of your compensation, and in that case you would lose £1,650 of a £5,000 compensation claim.

You don’t have to use these firms to make a claim but if you do, remember to check the following:

  • The potential costs and benefits of using a claims-management company (CMC)
  • The terms and conditions, including fees, before you sign any contract
  • Whether or not the company is regulated by the Ministry of Justice or by a professional body (the Law Society, for example) and will have to meet certain professional standards.

Can I complain about a CMC?

If you feel like you've been let down, the legal ombudsman accepts complaints about claims-management companies. 

Read our advice on how to complain to an ombudsman.

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