What is PPI and why is it controversial?
Payment Protection Insurance (PPI) is a type of insurance that covers the repayments of loans, mortgages, credit cards, or other debts in case the borrower becomes unable to pay due to illness, unemployment, or death. However, PPI has been widely mis-sold by banks and other financial institutions to millions of customers who did not need it, want it, or even know they had it. Some customers were told that PPI was compulsory, or that it would improve their chances of getting a loan. Others were not informed about the high commissions, fees, and exclusions of the policy.
The PPI scandal led to the largest consumer redress scheme in British history, with over £38 billion paid to claimants to date. The deadline for customers to submit their claims was set at August 29, 2019. However, a new wave of PPI claims has emerged after legal judgments have ruled that customers can claim 100% of the PPI cost back because commission levels were unfair. This is known as the Plevin rule, named after a case brought by Susan Plevin, who successfully challenged the 71% commission she paid on her PPI policy.
How are banks delaying PPI claims?
Customers who want to pursue a Plevin claim have to make a Data Subject Access Request (DSAR) to find out how much undisclosed commission was levied on their PPI policy. This is a legal right under the Data Protection Act 2018, which requires organisations to provide individuals with a copy of their personal data within one month of receiving the request. However, many customers have reported that their DSARs are taking months or even years to be answered by banks, who are accused of deliberately sitting on a huge backlog of requests. Some banks have also asked customers to provide additional information or documents that are not necessary for processing the DSARs.
A letter to banks by MPs on the All Party Parliamentary Group on Fair Business Banking said such delays could be in breach of laws surrounding the DSARs. It said: “There are real concerns that some banks may be deliberately delaying their responses to frustrate and stifle claims.” The letter also warned that banks could face legal action or regulatory intervention if they continue to obstruct customers’ rights to access their data and seek compensation.
What are the implications of the PPI claims?
It is estimated that the Plevin claims could cost banks £18 billion in compensation, on top of roughly £40 billion paid out to date. This could have a significant impact on the profitability and reputation of the banking sector, which is already facing challenges from the COVID-19 pandemic, Brexit, and digital disruption. Some analysts have suggested that banks may try to pass on the costs of the PPI claims to their customers by raising fees, interest rates, or charges.
On the other hand, the PPI claims could also benefit the economy and society by providing a boost to consumer spending, saving, or investing. Many customers who receive PPI refunds may use the money to pay off debts, buy goods or services, or save for the future. This could stimulate the demand and supply of goods and services, create jobs, and increase tax revenues. Moreover, the PPI claims could also enhance the trust and confidence of customers in the financial system, and encourage them to seek redress for other forms of mis-selling or malpractice.
How can customers make a PPI claim?
Customers who have not yet made a PPI claim or who want to make a Plevin claim can follow these steps:
- Check if they have had PPI on any loans, mortgages, credit cards, or other debts taken out since 1990. They can do this by looking at their statements, contracts, or other documents, or by contacting their lenders or providers.
- Make a DSAR to their lenders or providers to find out how much commission they paid on their PPI policy. They can do this by filling out a DSAR form, which can be found on the websites of the Information Commissioner’s Office or the Financial Conduct Authority, or by writing a letter or email to their lenders or providers. They should include their name, address, account number, and any other relevant details. They should also keep a copy of their DSAR and proof of postage or delivery.
- Wait for a response from their lenders or providers, which should arrive within one month of sending the DSAR. If they do not receive a response or are not satisfied with the response, they can complain to the lender or provider, or escalate the matter to the Financial Ombudsman Service, which can adjudicate on PPI complaints for free.
- Make a PPI or Plevin claim to their lenders or providers, using the information they received from the DSAR. They can do this by filling out a PPI claim form, which can be found on the websites of the Financial Conduct Authority or the Financial Ombudsman Service, or by writing a letter or email to their lenders or providers. They should include their name, address, account number, PPI policy number, commission amount, and the reasons why they think they were mis-sold PPI or paid unfair commission. They should also keep a copy of their claim and proof of postage or delivery.
- Wait for a response from their lenders or providers, which should arrive within eight weeks of sending the claim. If they do not receive a response or are not satisfied with the response, they can complain to the lender or provider, or escalate the matter to the Financial Ombudsman Service, which can adjudicate on PPI claims for free.
Customers who need more information or assistance with making a PPI claim can visit the websites of the Financial Conduct Authority, the Financial Ombudsman Service, the Money Advice Service, or the Citizens Advice Bureau, or contact them by phone or email. Customers can also join a group legal claim that aims to help millions of PPI customers, such as the one launched by law firm Harcus Parker, which has already signed up more than 350,000 people.