If you've had a loan or credit card over the past six years, you could be owed £1000s due to payment protection insurance (PPI) mis-selling.Today, the banks are fighting back, taking the regulator to court in an attempt to stop payouts. Our Money Saving Expert Martin Lewis is here to take you through it.
Q. What’s happening?
The banks are revolting. They’re taking the regulator, the Financial Services Authority (FSA), to court in a case which could see the future of billions of pounds worth of mis-sold insurance decided.
The key to all this is the FSA wants banks to review their past sales, and where they identify wide-scale mis-selling (according to FSA definitions), they must then contact customers themselves, possibly even paying them out there and then, rather than waiting for customers to put claims in first.
The banks, of course, want to stop this as it could cost them £2 billion and are arguing the review isn’t fair and is based on ‘retrospective’ rule making. They claim the FSA is unfairly applying rules it drew up after those sales to judge the way earlier policies were flogged.
The case is expected to last four days.
Q. What is PPI?
It’s supposed to cover your loan or credit card payments, usually for a year, if you cannot work due to involuntary unemployment or sickness.
Policies themselves aren't bad, and can be worth getting, but the versions sold by banks are mega expensive and have been systemically mis-sold for years.
Q. How do I know if I’ve been mis-sold?
Mis-selling can happen for a number of reasons. The key is the seller should ensure the policy is appropriate for you, but in many cases it didn’t. It was pushed by highly incentivised sales people as these are hugely profitable policies, often much more profitable than the loans themselves.
Examples of mis-selling could be telling you it's compulsory when it’s not, adding it on without telling people, giving the self-employed cover for people in employment, not asking about pre-existing conditions and more.
Q. What should I do if I've been mis-sold?
If you think you’ve been mis-sold you should write a letter to your bank telling it why and asking for the cost back (more info via useful links). Many people get £1,000s back – big money.
Q. What if the bank has told me my case is on hold?
Sadly, this is happening across the country. There is no official ‘hold’ on PPI reclaiming, but the banks (other than Santander) are saying they won’t deal with claims until after the result of the court case.
However, unlike the sanctioned hold that used to be placed on bank charges reclaiming, this isn’t an official hold and the failure to deal with cases goes against the FSA and the Financial Ombudsman Service rules.
Even after this court case, it’s likely one side or the other will appeal all the way up to the Supreme Court, and that could mean this lasts a couple of years.
However, the important thing to remember is even if the bank puts you on hold, you still have a right to go to the Ombudsman, the independent adjudicator of financial disputes, though you must have complained to the bank first.
Although, with all this going on, the Ombudsman has become log-jammed, and it’s taking over a year in some cases to get a result.
Still, with this much money, it’s worth the wait, and as the Ombudsman is free and you don’t need a claims handler to help, it means you get to keep all the cash.
For more info and links see the ‘Useful links’ section, top right