Nearly three million borrowers could be in line for insurance refunds averaging £1,000 - so what are you waiting for?
Since 2003, we at lovemoney.com have been campaigning against rip-off payment protection insurance (PPI). The good news is that, after seven years of battle, the tide is turning against poor-value PPI...
This ‘protection racket’ is over
This week, financial watchdog the Financial Services Authority (FSA) issued a long-awaited document, with the snappy title of ‘Assessment and Redress of Payment Protect Insurance Complaints’. In 156 pages, this policy statement sets out how customers should be treated when buying PPI and making complaints about it.
The key features of the new rules are that if someone complains:
- they should be reimbursed their PPI premiums, plus interest, if the firm decides the customer would not have bought the policy in the first place
- where the premium was a single payment up-front, if the firm concludes the customer would have bought a regular premium policy instead,they should be put back in the position they would have been otherwise.
The FSA has given banks, building societies and other lenders until 1 December to adopt its new rules for dealing with PPI sales and complaints. This is great news as, for years, PPI policies have been damaged by over-pricing, poor design, high-pressure sales tactics and anti-competitive behaviour.
In the above report, the FSA warns that cost of complying with these new rules could be as high as £3.2 billion -- a big blow for banks, but a boost for borrowers. Of course, lenders could hit back against this increased regulatory burden by making PPI even more expensive, but this is unlikely. Instead, in order to defend their profits, this regulatory burden could lead to higher interest rates for all borrowers. Boo!
Mending a broken market
With its report, the FSA has produced a list of common sales problems and bad practices which firms should use to review previously rejected PPI complaints and problem sales. The regulator expects firms to report the outcome of these investigations for monitoring by the FSA.
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In my experience, millions of policyholders aren’t even aware that they have been sold PPI, as it was quietly added onto their credit agreements without their knowledge or approval. Also, a large number of PPI policies have been sold to borrowers who, thanks to their personal circumstances, have no hope of making a successful claim.
On publication of the report, one FSA director remarked that, “We are confident we can mend a market that has been broken for too long.” Since the FSA took over regulation of PPI on 14 January 2005, it has taken action against 24 firms selling PPI, issuing fines totalling almost £13 million.
£2.7 billion up for grabs
The FSA estimates that, under its new rules, PPI providers could receive about 550,000 complaints a year for the next five years. This means that around 2.75 million borrowers could be in line for PPI refunds totalling a tidy £2.7 billion.
That’s an average of £982 per person, which shows you just how much of an expensive swindle this cover is. In some cases, the FSA estimates that refunds could exceed £1,800 for single-premium policies covering personal loans or mortgages.
Complain and win
So, if you feel that you were mis-sold a payment protection insurance policy on or after 14 January 2005, then don’t delay. Set out the reasons for your complaint in writing and then send this letter to your lender. If your policy was entirely unsuitable, then you are entitled to demand the return of your entire PPI premium, plus interest at the appropriate rate.
For the record, most providers reject around half of PPI complaints, with some rejecting nearly all grievances. However, since 1 April 2010, the Financial Ombudsman Service (FOS) has received 21,417 complaints about PPI. In almost four out of five (80%) cases, the FOS ruled in favour of policyholders.
Also, if you’ve complained about PPI before, but the provider rejected your case, then ask for a review under the new rules. If you’re not satisfied, then escalate your complaint to the FOS.
In short, you have nothing to lose and everything to gain from taking your complaint to the FOS, so what are you waiting for? Let’s work together to kill off this rip-off for good!
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