Whether you’re a TV watcher or a radio listener, you’ll have noticed that the media has been awash in recent times with a commotion concerning mis sold insurance. PPI, or Payment Protection Insurance, purports to indemnify the recipients of finance in case they are unable to meet their repayment obligations. Typically, the insurance is intended to cover consumers who are made redundant, who are suddenly unable to work due to long-term sickness, or who suffer an accident and become disabled. It’s easy to see why this backup could be a good idea for many borrowers – the extra peace of mind provided would be valuable. However, millions of people are currently making PPI reclaims, as their policy had been mis sold to them.

‘Mis Sold’? What Does That Mean?

Unfortunately for many borrowers, providers of PPI (including the high street banks we are all familiar with) have been misleading their customers. In 2011, the High Court ordered financial institutions to repay PPI premiums where the insurance was bought by loan recipients who had been misled as to its nature or purpose. It turns out that banks had either lied or neglected to mention to their customer a number of key facts – meaning that some people who bought the insurance were manipulated into making an uninformed purchase, and that others simply never needed the insurance in the first place. PPI reclaims exist so that affected borrowers can recover the loss that they suffered at the hands of the banks.

Which Groups of People are Entitled to Make PPI Reclaims?

Insurance (Photo credit: Christopher S. Penn)

If you want to know whether or not you’re entitled to compensation from your loan provider, you’ll have to check your policy documentation and cast your mind back to the time when you bought it. Were you told that taking out PPI would mean that your loan application was more likely to be accepted, or that the insurance was compulsory? Were you consulted about purchasing PPI, or did your bank simply ‘assume’ and charge you for it without first receiving your consent? When you took out the policy, were you unemployed, self-employed, or retired? If any of the above sets of facts applies to you, then you could be one of the millions of consumers making PPI reclaims.

How Much Will I Receive?

The amount of compensation available varies from case to case, with the average being in the region of £2750. This certainly makes PPI reclaims attractive, especially during a time when households and businesses all over the country are feeling the financial squeeze of the recession. If you’re interested in finding out how much you could stand to receive, you’ll need to check your policy. Borrowers should also note that if they paid with a series of installments, with interest payable on top, then these interest payments can also be claimed back. Furthermore, it should be borne in mind that it doesn’t matter whether or not you’ve already finished paying off your loan – anyone who was mis sold a policy can claim.

Peter Gouldsworthy is a former solicitor who practiced commercial and financial law for over 30 years. Now retired, he enjoys blogging about contemporary legal issues.