Paul Lewis That’s the official figure as published by the City watchdog the Financial Services Authority. And the average for the two and a half million who can claim it will be close on £1000 or £2000 depending on circumstances. Final details have not yet been issued – it will be another couple of months or more before that happens. But you can claim now if you think you may be due compensation.
The compensation will be paid to people who were sold insurance to protect their payments when they took out a loan or credit agreement in the last five years. This so-called payment protection insurance, or PPI, sounds a good idea – until you read the small print. Many people (including those who do not work or are retired) are excluded from claiming but were still sold the policies. Many others who appear eligible are refused pay outs because they had existing medical conditions (often irrelevant ones) or lost their job in the wrong way. And even those who make successful claims often find that the insurance only covers the interest on the loan for a limited period. On top of that the cost of the insurance was sometimes as much as ten times the market rate.
Now, after research, reports, and tens of thousands of complaints – almost all of which are upheld – the Financial Services Authority has finally decided to get tough. It is planning to make companies who sold PPI (a) to review all past sales (b) to review all past rejections of complaints and (c) to contact anyone who they think may have been mis-sold this product. But that will take a long time. So my advice is that anyone who has taken out a loan, a credit card, a mortgage, or any other borrowing in the last six years should see if they were sold insurance at the same time. If they were that could well have been a mis-sale and compensation could be due. Two independent guides as to what to do are at www.moneysavingexpert.com/reclaim/ppi-loan-insurance and at www.which.co.uk/advice/how-to-tell-if-youve-been-mis-sold-ppi/index.jsp. And remember that if you were over pension age or retired it was almost inevitably a mis-sale.
Final warning. Never go to a commercial company to help you make the claim. They charge you money for doing something you can do free yourself. Claims put in by companies stand no more – and sometimes less – chance of success than ones put in by individuals. Some firms even charge you a fee before your claim is successful. Avoid them.
More information: www.fsa.gov.uk/pages/Library/Policy/CP/2010/10_06.shtml
Written by Paul Lewis, this article was first published on March 16, 2010. Paul's opinions are his own and for general information only. Always seek independent, professional, financial advice.