This is part 2 of a 3-part article on reclaiming Payment Protection Insurance (PPI), and is an interview with someone who took on Lloyds TSB on their own, sharing their tips and savvy tricks and their outcome.

Part 1 covers exactly what PPI is, how it applies to products, and how and why the PPI Refund industry has taken off recently. It also exposes the 13 most common reasons you may be due to a PPI refund. 

Part 3 covers exactly how to go about reclaiming on your own, for free.

This morning I’m interviewing Bryony, a 27 year old female from Portsmouth who has done exactly what I’m going to show you how to do tomorrow -and won! – without having to spend out a penny beyond the cost of posting a couple of letters.

Hi Bryony! Thanks for agreeing to share your PPI success story. I hope it will encourage others to take the plunge and give it a go.

When and how did you first realise you may be due a PPI refund?

 

“I first read about PPI reclaims several years ago through articles posted on moneysavingexpert.co.uk and consumeractiongroup.co.uk. There was lots of information on the court case and how to claim on both sites which was really helpful.”

What was the product you were mis-sold on, and which company was involved?

 

“The product was a Lloyds TSB credit card, originally sold to under the name of ‘More Than’ back in 2003.”

How was the PPI mis-sold on that card?

 

“Back in 2003 when I got the credit card, I was a full time student and was at any point in that year only working 8 hours per week, therefore I would not have been covered for Payment Protection [Insurance]. Based on my employment situation, I should not have been offered the cover in the first place and was paying for an insurance that I could not claim under [if I needed to].”

 So how did you go about re-claiming?

 

“I wrote to Lloyds TSB using a template that I found on the comsumeractiongroup.co.uk website and edited it to suit my situation. I detailed the reason that I believed the PPI was missold and requested repayment in full of all premiums paid and statutory interest. [8%]“

 So you did it all yourself, rather than employ a PPI reclaim company?

 

Yes, I did a bit of research into the process of reclaiming and realised that there was nothing a claims company could do for me that I couldn’t do myself, except take a cut of my repayment for themselves!

I wrote a letter using an edited template reclaim letter, this initial request was rejected on the grounds that although I could not have claimed on the insurance at the time I took out the credit account, once I’d finished university (3 years after taking out the card) and got a full time job, I was then eligible for the insurance.

A couple of years later I read an article that said many banks had been rejecting genuine claims and wrote another letter explaining that I would like my case to be reopened. My reasoning was that at the time of purchase, the PPI was missold and it was irrelevent whether I would be eligible for it in the future.

When did you start reclaiming, and how long did it take?

 

“My initial letter was written back in 2008 but after several months, this was rejected. I reopened my case in June 2011 and received my settlement cheque today (April 2012).”

Was it hard to do it on your own?

 

“The actual letter writing part is very easy, there are some very good templates available as a starting point, and you usually only need to add a paragraph or 2 describing the reason that you feel you were missold the PPI. Some banks are providing ‘quick claim’ forms on their websites.

The hardest part is the waiting, it is generally not a quick process, but the day when you open the settlement envelope makes it all worthwhile.”

How much did you win back in the end?

 

“Total amount of PPI reclaimed was £509 (including statutory interest)”

Now that’s pretty good for a credit card. Of course, the potential refund and interest amounts can be much higher for loans. Is there anything you know now, that you wish you’d known at the beginning of your reclaim journey?

 

“Never give up, and never assume that your bank will stick to any timeline, even if they set it themselves!

If you plan to reclaim PPI on a loan or credit card, never treat it as guaranteed money, never budget to include it and never rely on it. Just send off your letter and IF you get a repayment, thats great – but it could take years of patience. My settlement cheque came completely out of the blue, a wonderful surprise and a triumph over mis-selling!”

 

Thanks for your time and for sharing your amazing self-generated success, Bryony!

 

Tomorrow in Part 3 I will walk you through exactly what you need to start your reclaim journey, and as Bryony has already started, point you in the direction of further resources that can help should you encounter any lender avoidance tactics.

Would you like to share your success (or not-so-successful) reclaim stories? Come chat in the comments.

This is a 3-part article on Payment Protection Insurance (PPI), with the first instalment today. This post covers exactly what PPI is, how it applies to products, and how and why the PPI Refund industry has taken off recently. It also exposes the 13 most common reasons you may be due to a PPI refund. 

Part 2 will be an interview with someone who took on Lloyds TSB on their own, and savvy tips, tricks and outcome.

Part 3 covers exactly how to go about reclaiming on your own, for free.

You can’t watch TV for longer than 15 minutes these days, or read a newspaper without hearing about how YOU are due a PPI (Payment Protection Insurance) Refund. “If you call one of our claim handling specialists right now we can secure you thousands!” It’s the same on the radio. I even get them spammed to my mobile phone by text message and email. I’ve even had them appear on my blog as spam comments (thankfully caught).

The problem is not so much that you may (or may not) be due a refund of your PPI premium and associated interest payments, but more about how the service is offered. The vast majority of the commercial refund companies thrusting their services at you by any means possible is that they will charge not only an upfront fee, but potentially a percentage of any claim you receive. They also have no particular vested interest in seeing a positive outcome for you as they in the main rely on the under-informed applying in droves, paying a ‘small fee’ and potentially receiving thousands in return.

A Brief History of PPI

What is PPI?

PPI stands for Payment Protection Insurance and it is an insurance policy specifically created to help a creditor keep up with a loan or credit card in cases where they find themselves unable to work due to accident, sickness or unemployment.

When Did PPI Appear?

Payment Protection Insurance has been around for decades in one form or another. It was only in 1998 however that the payment protection insurance sector was first uncovered as being widely mis-sold as potentially useless, yet adding significant additional revenue to banks and other institutions. Between 1998 and 2011, a number of court cases and appeals took place between both consumers and banks, and the Financial Services Authority and the Financial Ombudsmen Service.

Finally, 13 years after first coming to light on the 20th April 2011, the UK High Court ruled in favour of consumers, paving the way for potentially tens of billions of pounds of refunds to be claimed.

Is PPI A Bad Thing?

Payment Protection Insurance isn’t necessarily a bad product. Like all insurance it is designed to cover you in times of hardship, much like home insurance, car insurance and gadget insurance. It’s a peace of mind product. The issue surrounding the PPI Debate is the way the insurance was sold, and not necessarily about the insurance product itself or the credit facility it backed.

It isn’t a panacea though as, particularly in the case of credit cards, PPI will only satisfy your Minimum Payment and usually only for a 12-month period. If you are off sick or unemployed for longer than that, most policies will end their cover and you’ve merely delayed the catastrophe rather than averted it.

For a more solid approach – or in addition to – check out my SCRAM Plan approach and the importance of redundancy planning.

So Why The Refund Epidemic Now?

The whole PPI problem centres around mis-selling. In the worst cases, PPI was included in loans without the consumer even knowing about it. The worst example of which was the Single Premium Policy style of loan, where instead of paying monthly for the cover, or as an up-front fee separate to the loan product, the entire cost of the policy was added to the borrowing at the start of the term. This meant consumers were borrowing (sometimes much) more than contractually agreed and paying interest on the policy and the loan every month, costing hundreds or even thousands of pounds.

There has been low-level refund claims taking place for at least 10 years now, but it has massively taken off since the ruling in the High Court last year.

Was PPI Limited to Just Loans?

Unfortunately not. The mis-selling also applied equally to credit cards, where consumers were bullied into taking the insurance worded such that it appeared the application would not be approved if they did not (or doing so would increase their chance of acceptance), were signed up regardless or without being asked, or had the insurance started even though it was not appropriate or applicable to their individual circumstances.

Reasons for PPI Refunds

The first question on most people’s minds is “am I due a PPI refund?“. The answer to that question if you have had a loan or credit card taken out within the last 10 years or so is “maybe”. There is no hard and fast rule as to who is and who is not eligible to a refund without first knowing a little bit about the product, your circumstances at the time, and the circumstances surrounding the PPI sale.

It certainly isn’t as simple as the claims companies make out. I have put together a list of the 13 most popular reasons for initiating a claim and if your circumstances at the time of the insurance being taken out matches then you probably have a good cause to begin refund proceedings.

1. You were under 18, or over 65 at the time of the sale

PPI policies have age restrictions and depending on your particular product, you may find you have paid (or are paying) for insurance that is already invalid to you because you are outside of its age limits. Now the under 18 part shouldn’t affect more than a handful of people, but the ‘over 65′ part may catch out more folks. This is a classic as the sales agent would have your date of birth as a standard part of the loan application process.

2. You worked part time

PPI policies in the main don’t cover people who work less than 16 hours a week. The person selling you the insurance product would have known this, and should have had sufficient information within your application to be able to deduce this fact for themselves. If you were still sold  payment protection insurance despite the sales person being aware (or negligently unaware) you didn’t work full time, you have a claim for mis-selling.

3. You were on a temporary contract

Temporary staff or contract workers (and even some agency staff under some policies) are ineligible for PPI cover. Much like the ‘part time’ scenario above, the person selling was either entirely aware the product was unsuitable for you but sold it anyway, or was negligent in their selling of it by deliberately not enquiring if it suited your circumstances.

4. You were self-employed

PPI policies with unemployment protection are usually not applicable to those who are self-employed. As with all of these you would need to read the policy terms to find out exactly what it covered, but on the whole being self-employed negated some or all of the cover.

5. You were a student

This ties in with (2) and (3) but may make students re-evaluate if they skipped over them. The chances are if you are a student then you are not working full time, or you are employed on a seasonal or temporary contract basis. Being a student in itself is not a reason, but you need to examine the circumstances surrounding you being a student to see if elements of your study would render your policy mis-sold.

6. You were already ill

Pre-existing conditions are likely to void any PPI policy if your illness should worsen, leading to a loss of income. In these cases, you should not have been offered the insurance in the first place. Think about how quickly travel insurance companies drop you should a pre-existing undisclosed medical condition crop up during a claim – it is much the same with PPI.

7. You were mis-informed about the extent of cover

Mental health issues such as stress or depression, and common muscular problems, such as backache, are often not covered by PPI policies. This should have been explained to you when you were offered the policy and potentially may also tie in with (6). If you already had a condition, or you were not informed of the exclusions, you may have a case for claim.

8. You were aware you may become unemployed

If you had reason to believe that you were facing an imminent loss of income, then you would have been ineligible for insurance covering this event and should not have been sold the PPI (or been applying for the credit in the first place – but that’s an entirely different discussion!). Most policies have conditions that would render your situation uncovered in such circumstances, and indeed have a period of time immediately after the cover begins that you are not able to claim in, further increasing the mis-selling aspect.

9. You were not told about the insurance

Or the cost of the insurance. Your lender should have clearly gone through the policy with you, checking you were eligible for cover, explaining with you what was covered and what was not, and how much it cost to purchase the cover. If you were not informed of the cost of the cover overall (see the ‘Single Premium Policy’ scam above), or you were unaware until some time later that you’d even been sold the cover, then you likely have reason to claim.

10. You already had similar insurance

Some standalone insurance policies provide income protection, or you may have been covered by a scheme from your employer to cover your liabilities for a set period in times of sickness or redundancy. The lender is obliged to look into whether you are already covered and if they did not, again you likely have reason to claim.

11. You were told it was mandatory

This, despite being number 11 in my list, is my biggest pet-peeve with this whole sorry saga. PPI is an optional purchase of an insurance product, and does not affect your eligibility for a loan or the interest rates payable. Lending institutions were not supposed to offer a discount if you take out an insurance policy, or make it sound like you are more likely to be accepted if you do, or less likely if you do not.

12. You were not told other options existed

Many of the PPI cover options provided by credit facilities are more expensive than if purchased as a standalone product from elsewhere. You are not obliged to take out PPI at all (as 11), but if you choose to do so, you are not obliged to take it out from the same company providing your loan or credit card. If you were not told that you have the opportunity to shop around for your PPI, you once again may have been mis-sold.

13. The PPI box was already ticked

Prior to July 2007, many online loan and credit card application forms had a tick-box to indicate whether you wanted to purchase Payment Protection Insurance or not. In a large number of cases, the page loaded with the box pre-ticked, so that customers had to opt out of buying the insurance, rather than opting in. This was changed after concerns raised by the Financial Services Authority and can indicate you were mis-sold as the PPI may not have been adequately explained to you, or you did not understand the relevance of it.

This list isn’t exhaustive, but does give a good start to discovering if you may be eligible for a refund of your PPI.

Conclusion

As you can see the PPI arena is a minefield, but it should be fairly clear at this point whether you have grounds to claim a refund. There is no magic or voodoo involved in working out whether you are due a claim or not, and there is certainly no need to either stump up your hard-earned cash to pay a company to claim for you, or indeed lose some of your compensation to them on a ‘no win, no fee’ basis. It’s something you can do yourself sometimes completely free, or minimally at the cost of a couple of postage stamps.

Be sure to check back tomorrow when I will be interviewing Bryony about her claim journey against Lloyds TSB and she will share her hints and tips with you for your own journey that I will explain in detail in Part 3 on Thursday!

Before 2009 I was in a dark place both emotionally and financially.

I held the view that credit cards were there to supplement missing income, handling day-to-day spending (and carrying the balance) and that minimum payments were my best friend.

What an idiot I was.

Today, continuing my ongoing thoughts on reducing the costs of debt I totaled up the cost of my “hell” credit card which is now paid off, and my “heaven” credit card that carries a balance, but at 0% APR. Once paid off this card will never carry a balance again. It will be set to ‘pay in full’.

The Hell Card was mismanaged from the day I got it (9 June 2001), and virtually ignored from 2006 onwards. This card has cost me thousands of pounds in interest, overlimit fees and payment protection insurance that I didn’t even know I had. While the online facility doesn’t provide full access to statements from day one, I have totaled up the last year to date and had a look at how badly managing a credit card – in personal finance terms – can cost you dearly.

The interesting point is throughout the life of this card, I have been reported every month as an ‘excellent’ customer to the Credit Reference Agencies. The company concerned has made money off me every single month for 8 years, and I have never missed a payment. I was their ideal customer: paid on time, always carried a balance, never challenged their fees and had their insurance to boot.

What an idiot I was.

As we can see, for the first 4 data-set points I was still burying my head in the sand. The minimum payment was going up, the interest was going up, the PPI costs were going up, and I was being dinged with a £16 over-limit fee every single month on top of this.

The next month I was charged interest on this over-limit fee, and interest on the interest of the over-limit fee on top of the balance. When you start compounding credit card fees, your debt quickly snowballs into hellish proportions.

On the 4th data point above (January 2009) I had my light-bulb moment. I’d had enough and wanted out. I balance transferred £900 off of the card onto a 0% deal, made a one-off payment to get back under my credit limit, and upped my regular payments. The fees stopped on the next statement.

From that point onwards, the card looks more sensible. Imagine for a moment though what the graph would look like if I had access to the previous 7 years worth of data. I will be writing to the company to try and get this information for another post – I’m genuinely interested to see what it looks like.

The cost of the Payment Protection Insurance goes down with the balance, as does the minimum payment required and the interest being charged. If I’d been sensible I should have canceled the PPI in January, but hindsight is a wonderful thing.

What an idiot I was.

The Heaven Card in contrast, has been well-managed from day one.

I obtained it as part of my journey to financial sensibility and debt freedom, so perhaps this shouldn’t be too surprising. I stupidly let myself be sold card protection when I activated the card, and the fee for this was charged to my Standard Balance behind my 0% transfer. Oops. Over the whole year though, the interest only works out at £12: less than one over-limit charge on the hell card.

If I’d noticed what was happening over card protection, I would not have paid a single penny in interest during the life of the balance transfer. No fees, no interest, no PPI, nada. Compare this to the hell card:

That looks considerably less painful to my wallet – and it was. Aside from the (currently) £8 in interest from my Card Protection error, I’ve not paid a single bit of interest, or PPI or fees. In 1.9 payments time the balance will be £0 and I would have paid just £10 interest for my card protection blunder. Not too shabby, and not a mistake I’ll be making again.

In total, in just 12 months (and I only had my head buried in the sand for 3.5 of those months) I got stung for £664.14 worth of interest, insurance and fees for borrowing £3,500 on my hell card. Multiply that over 7 years and that is potentially £4,648.98 worth! What an amazing waste of money. That is – all but pennies – exactly how much I am still in debt by as of August 2009. Ironic.

The real kicker: If I had opened a savings account in 2001 with £10, and paid myself that sum divided over the months, compounding monthly earning 5% for 8 years I’d be sitting on £6,558.41!

What an idiot I was.

I will be attempting to reclaim these charges at some point – if I win then it will go nicely towards getting my Emergency Fund going. If not, then no harm in trying.

I think it important I make the point that despite my own idiocy, I still do not view credit cards as  inherently bad. They are not your best friend by any means, but credit cards are a tool much like a chainsaw. If you are sensible with the tool, it can make life much easier. Used correctly it can even make you money.

If you are an idiot with it though, it can cost you dearly.