What is Payment Protection Insurance?
Payment protection insurance is one of the latest issues to gain considerable attention from both consumers and consumer watchdogs across the country. Whenever consumers enter into any sort of payment contract, be it a hire purchase style agreement or an insurance that is paid instalments, there is always a concern that the person entering into the agreement will suffer a change of circumstances which renders them unable to make the payments.Payment protection insurance (or PPI) aims to deal with this situation and is an additional payment that is added onto the capital amount of the loan. If the purchaser finds themselves unable to meet the payments due to certain circumstances such as loss of job or illness then the PPI will kick in and make the payments for them.
Where is PPI Sold?
PPI has been sold in a range of circumstances although the most commonly see use of PPI is that attached to loans and lending situations such as mortgages and loans. Any type of regular payment also potentially attracts PPI such as home insurance or car insurance that is paid in instalments.
Instances of PPI have also been seen when individuals are purchasing large items such as cars, computers or electrical goods. These are in essence loans but they can be attached to buy now pay later type scenarios and therefore the cases for reclaiming PPI are often far more remote than they originally appear. PPI should only be sold where the purchaser could potentially make a claim on the insurance. For example if the insurance is aimed at providing support for an individual who loses their job this would not be appropriate for someone who is unemployed.
Regulatory Difficulties for PPI
Recently several of the regulatory bodies have shown an interest in the way in which PPI is sold and put forward to customers. The Financial Services Authority has begun to issue fines to companies who are deemed to be treating customers unfairly. As a result of this the sale of PPI was banned during the first week after a loan or credit card had been sold and also requiring those selling PPI to identify how much of the cost is attributed to PPI and preventing single premiums being used as part of the sales.
The Financial Ombudsman has also dealt with several complaints in relation to PPI and has felt that some lenders have been obstructing their work. It has been estimated by the Ombudsman that around 89% of consumers who attempt to reclaim PPI are successful, a fact that lenders have not been prepared to publicise.
Data has now been released by the Ombudsman relating to individual lenders and the level of reclaimed payments from each lender which has further encouraged individuals to look at loans they have taken out in the past and whether or not they have the right to reclaim these payments.
Further concerns in the lending industry were highlighted when one lady managed to get her entire debt wiped off in September 2009 due to mis-sold PPI.
The Law Behind PPI
The main legislation that deals with PPI and the ability to reclaim is that of the Credit Consumer Act 1974. Under this legislation where consumers are sold credit arrangements that do not comply with the requirements of the act could potentially render the agreement unenforceable. This would potentially allow part or all of the agreements to be reclaimable.
Time Limits for Reclaiming PPI
Before starting any court action to reclaim PPI the first step is to consider which loans that may be potentially eligible for reclaim. There are time limits as to when the loan was entered into which is one of the main bars to making a claim. Only loans within the last 6 years are eligible for being reclaimed against. It is not necessary for the loan to still be active, but it must have commenced in the last six years.
Even if the loan began more than six years it may be possible to reclaim although the chance of success will be considerably less. In the case of loans that were started more than six years ago but is still active it may be possible to reclaim.
Any loans that have not been active in the last six years are unlikely to allow consumers to reclaim anything n relation to PPI although it may still be worth trying particularly if there had been a blatant mis-selling.
Pre Court Actions for Reclaiming
The first step with reclaiming PPI is to gather all of the relevant paperwork and to complete a questionnaire that is available from the Ombudsman and to write to the lender informing them of your intention to reclaim the PPI. In a lot of cases this will then enable the lender to enter into a dialogue with you to discuss possible amounts to reclaim.
If this is unsuccessful then the next step would be to notify the lender that you intend to take the case to the Ombudsman and then to send the full documentation to the Ombudsman to deal with. If the organisation is regulated by the Financial Services Authority then the case can also be put before them. In limited circumstance it may be necessary to take the matter to court but in most cases lenders will attempt to settle in a way that prevents them from having to have the publicity surrounding a court case.
Factors that suggest you may be able to reclaim PPI:
Has the loan been active in the last 6 years?
Did you know that you had taken out PPI?
Were you told that PPI was compulsory?
Were you unemployed, self employed or retired at the time of entering into the loan?
Do you have substantial existing medical conditions?
Has your lender got a previous history in being fined for PPI mis-selling?