About PPI

How do you spot problems with your Payment Protection Plan?

Consumers have been overcharged by £1.4bn on Payment Protection Insurance, according to the Competition Commission

Many firms have been fined for breaking the rules and failures in the way they sell PPI to customers.

Although there are clear rules that any firm or advisor selling a PPI policy has to follow, mis-selling is still a problem and consumers could be missing out on claiming back money that is rightfully theirs. Which? research shows that at least two million people may have a PPI policy they would never be able to make a claim on.

Payment Protection Insurance on credit cards

With credit cards, Which? has found that almost 13% of people surveyed believed getting PPI was a condition of their credit card deal, or that their application was more likely to be accepted if they had it.

According to the Competition Commission, credit card PPI is the second largest slice of the PPI industry, but only 11% of claims are successfully paid out, so it's big business for providers.

Big profits on bad products

In October 2006, the Office of Fair Trading (OFT) estimated there were approximately 20 million policies in force, with between 6.5 and 7.5 million further policies being sold each year.

The profit the industry makes each year from the sale of PPI policies is estimated to be £5 billion.

And to make matters worse, the OFT found only 20% of the money collected in premiums is ever paid out in claims.

Compare that rate to other general insurance policies; car insurance pays out 82%, house insurance at 54%, pet insurance at 72% and medical insurance at 80%.

Mis-sold policies of over £1.4 billion a year

There was enough evidence to convince the OFT that the PPI market wasn't working for consumers. In February 2007, the OFT referred the issue to the Competition Commission.

In June 2008, the Competition Commission published its provisional findings on the PPI market.
It concluded that 'companies face little or no competition when selling payment protection insurance to their credit customers, and as a result customers appear to be overcharged by over £1.4 billion a year.'

The regulator for financial services the Financial Services Authority has also carried out extensive research into the selling of PPI, resulting in several providers being fined.

It published its findings in three reports. They show that despite previous warnings, many firms are still failing to treat customers fairly.

Between 25-28 January 2011, the British Banker's Association (BBA) took the Financial Services Authority (FSA) and Financial Ombudsman (FOS) to court. The BBA lost their case over complaint handling rules on PPI.

Medical exclusions

Payment protection insurance policies often have many exclusions, so you can't be certain that you'll get any money if you do make a claim. For example, if you have a medical condition (even if this isn't particularly serious) when you take out the insurance and weren't told about any exclusion relating to this, you won't be covered for anything that can be linked to that condition - in fact, you may not be covered at all. Most policies also won't cover you for conditions such as back pain or stress.

You could still be paying after your protection has expired

Most PPI policies only last for five years, so if your loan or finance agreement term lasts for longer than this, you'll still be paying interest on insurance that has long since expired.

Store cards and mortgages

PPI linked to mortgages, credit cards or store cards usually pays out for a limited amount of time only. Most often this is just 12 months, though some policies offer a 24-month pay-out period. On some credit card PPI, the insurance only covers the minimum monthly payment, meaning your balance may never reduce.

Payment protection insurance is too expensive

Adding PPI to a £7,500 five-year loan could cost an additional £2,000-£3,000 - a ridiculous amount! Consumers could end up paying interest on the insurance premium and the loan.

Following a long campaign by Which? and other consumer bodies, single premium PPI (SPPPI) has now been banned by the Competition Commission. SPPPI was detrimental to consumers because you could end up paying interest on the insurance premium and the loan.

This table shows how much more you may have paid with single premium PPI before the ban:

The cost of Payment Protection Insurance
Lender Monthly repayment without PPI Monthly repayment with PPI Monthly cost of PPI Total costs without PPI Total cost with PPI
Highest prices in survey
LV (LiverpoolVictoria) £167.74 £229.90 £55.16 £10,064 £13,374
Britannia Building Society £149.24 £201.61 £52.37 £8,954 £12,097
Sainsbury's Bank £146.26 £194.43 £48.17 £8,776 £11,666
Lowest prices in survey
Leeds Building Society £153.41 £171.82 £18.41 £9,205 £10,309
Bank of Ireland £151.88 £172.20 £20.32 £9,113 £10,332
Masterloan £146.26 £174.01 £27.75 £8,776 £10,441

Table notes
We compared the cost of a five-year £7,500 loan from 48 major lenders with and without PPI. The three most expensive and least expensive lenders are shown

sourced: 12-10-11, Which?

success stories

MONEY RECLAIM can help you reclaim the costs of payment-protection insurance (PPI)

Mr L from Stoke on Trent
was offered over £17,000 *
by the Royal Bank of Scotland in March 2017.

* The total amount received by the client was reduced by our fees for handling their case and income tax where applicable. Our Terms and Conditions give full details of fees payable.

Mr & Mrs McK from Scotland
were offered over £13,300 *
by the Bank of Scotland in March 2017.

* The total amount received by the client was reduced by our fees for handling their case and income tax where applicable. Our Terms and Conditions give full details of fees payable.

Mr E from Brighton
was offered over £20,000 *
from Barclaycard in February 2017.

* The total amount received by the client was reduced by our fees for handling their case and income tax where applicable. Our Terms and Conditions give full details of fees payable.

Mr & Mrs F from Staffordshire
were offered over £11,600 *
by the Yorkshire Bank in February 2017.

* The total amount received by the client was reduced by our fees for handling their case and income tax where applicable. Our Terms and Conditions give full details of fees payable.

Mr & Mrs D from Leeds
were offered over £21,000 *
by the Yorkshire Bank in January 2017.

* The total amount received by the client was reduced by our fees for handling their case and income tax where applicable. Our Terms and Conditions give full details of fees payable.

Mrs M from Glasgow
was offered over £17,000 *
by Marks & Spencer in January 2017.

* The total amount received by the client was reduced by our fees for handling their case and income tax where applicable. Our Terms and Conditions give full details of fees payable.

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* A fee will be payable for any claim(s) cancelled after the 14 day cooling off period or after a reasonable offer has been made by the seller of the product.
Cancellation fees may apply - see Terms and Conditions for details.

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