Over the last few years, you’ve probably received ten, twenty, if not a hundred phone calls about whether or not your bank owes you PPI compensation. Many of you will be wondering: “What are they on about?”
This is a short and simple explanation about PPI compensation. What PPI is and why you can get compensation.
Payment Protection Insurance is a type of product that insured any money you borrowed from any creditor. It insured the amount borrowed in case the borrower died, became ill, lost a job, or faced any other situation that prevented them from earning sufficient income to pay off their debt. PPI was widely sold by banks, credit card companies, and other lenders as an add-on to any borrowing.
PPI was so widely sold that in 2008 it was estimated that 20 million such insurance policies were active in the UK, and 40% of those with policies were completely unaware they had purchased it.
Herein lies why you can access compensation. In 1992 an anonymous “L W Price” took TSB Bank to court about the mis-sale of PPI on one of their products. The case was won by “L W Price” who claimed that they had not explicitly aimed to purchase an insurance product and was not aware it had been applied to their account. Unfortunately for other consumers, a ten-year non-disclosure clause was ordered as party of the settlement provided by TSB. This meant that details of the case could not be released for ten years, until 2003.
After the non-disclosure clause lapsed, which means the ten years finished, in 2003 a copy of the judgement made at Bristol Count Court in 1993 was sent to the Office of Fair Trading and the Citizens’ Advice Bureau. After an investigation a super complaint was raised in the courts. A super complaint is a complaint that represents all persons involved. This meant that instead of each individual customer needing to go to the courts, they were represented by a super complaint instead.
The super complaint was successful and in 2005 it became possible to claim back amounts spent on PPI. This judgement did not only apply to current loans but to any that had been paid off in the past too. Because of this judgement over five billion PPI claims have been successfully made, and it has become the most claimed about financial product that has ever existed.
In some cases it was estimated that PPI was as much as 56% of the premium of loans. For example, a secured loan of £25,000 and a proportion of 49% PPI (worth £12,127) would have cost a consumer £20,221.74 over a twenty-five year period at 4.5% interest. Indeed, in 2012 one woman received over £65,000 for a single PPI compensation claim with MBNA card.
This may seem like a very complicated and shocking story, but it gets worse. In 2014, the Financial Conduct Authority declared that claims made in 2012 and 2013 may have been unfairly rejected or paid too little. They also had said that seven out of every ten claims have been upheld in the consumer’s favour. Currently over one million complaints from people who are dissatisfied with their lenders response to their PPI claim are pending at the Financial Ombudsman Service.
That’s the story so far. It can be boiled down to this: banks largely miss old PPI as an add-on to loans and many customers were unaware that they were paying this as part of their premiums. In 1992, Bristol Crown Court ruled in favour of a complainant who wanted compensation for being mis-sold PPI. After ten years, this claim was submitted as a super complaint on behalf of anyone who has ever paid PPI premiums. It was ruled that anyone who had paid a PPI premium is eligible to claim for compensation from their bank. The case is still developing, even after all this time, and it’s estimated that the total amount returned to consumers will surpass £20 billion.