PPI – the mass payback isn’t yet complete

The deadline for reclaiming Payment Protection Insurance (PPI) has long since passed, but there are still potential refunds to be claimed.

Banks in the UK have refunded more than £38 billion to 12 million customers so far, and the sheer weight of customers making claims for mis-sold PPI – and registering their claims before the August 2019 deadline – means that hundreds of thousands of those claims are still to be settled.

But that is far from the end of the story.

That deadline was set with the intention of bringing the sorry saga to a clear and final conclusion. But the discovery of unfair commission payments for the lenders, brokers or intermediaries means a whole new chapter of PPI claims has been opened.

But first, a little background:

An estimated 64 million PPI policies have been sold to customers in the UK. The earliest date back to the 1970s but the vast majority were sold between 1990 and 2010.

HIDDEN FEES: Many customers have unwittingly paid their bankers and brokers commission on mortgages, loans and credit cards

The policies were sold to customers alongside a range of financial products, as they were told their repayments would be covered if they passed away, became ill or disabled, could not work for other medical reasons, lost their job or couldn’t cover their repayments for another reason.

However, a series of exclusions meant customers couldn’t claim on their PPI. The small-print conditions meant these policies were nigh-on useless and customers being talked into buying them were misinformed about how crucial – even essential – having a policy in place was. The insurance was mis-sold to millions who wouldn’t be able to claim on them anyway.

And the banking industry took little time to latch onto how profitable selling insurance with next to no chance of claims being honoured could be. They began an aggressive selling spree, flogging PPI policies to their customers whenever they could.

It was incredibly lucrative for banks and made them enormous profits. So much so that an investigation by Citizens Advice led to them dismissing PPI as nothing more than a “protection racket” and the Financial Services Authority declaring war on PPI when it began overhauling the regulations of the insurance industry as a whole in 2005.

Customers’ dissatisfaction with their banks boiled down to four elements of PPI sales. Those who were sold the policies said they were a) expensive, b) ineffective, c) inefficient and d) mis-sold.

And they’re right. 

PPI premiums added anything between 20% and 50% to the cost of a loan. Perhaps in part due to this, they were often added on to deals without customers’ knowledge. Or, if they were told anything about the PPI, it was that it was an essential extra.

GETTING UNDER WAY: With Barings Law, starting your compensation claim is quick and easy

So, that covers the ‘expensive’ and ‘mis-selling’ elements. As for ineffective and inefficient, well they are hardly in doubt either. With the policies’ wording structured in such a way that the chances of a genuine claimant getting a payment were remote, PPI was clearly ineffective.

An insurance policy that doesn’t insure its holder isn’t worth the paper it’s written on.

And in many instances customers making a claim only learned of their refusal after they had waited interminable amounts of time and navigated their way through painfully complex and lengthy claims procedures.

If this sounds like you, it’s time you did something about getting your money back.

Your first step is to give Barings Law a call on 0161 200 9960, to see what our legal experts can do to get you compensation.

Refunds have been paid to customers who were mis-sold PPI policies with their mortgage, loan, finance or credit card agreements.

There are three main elements to PPI refunds.

These are:

  • A refund of the actual PPI you have paid.
  • A refund of interest charged on the loan.
  • Statutory interest on the total of both of the above sums.

The PPI scandal is the largest consumer redress exercise in the UK’s financial history and, although the deadline came and went years ago, complaints are still being investigated.

A Guardian investigation in 2004 highlighted the outrageous sums of money that banks and other lenders were making from sales of PPI packages, especially when compared to the amounts they were paying out in claims.

SIGNING ON: If you have been sold a useless PPI policy then we can reclaim your money for you

The most cited example was Barclays, who collected around £350 million in PPI premiums over the years but paid out just over a quarter of that.

And Citizens Advice found that the cost of customers insuring their loans amounted to more than half the value of the original loan.

The bureau’s findings included some staggering figures, including a car finance package of £4,300 with PPI on top amounting to £2,394, a £25,000 secured loan where the cost of PPI was £12,127 and an unsecured personal loan of £11,000 where the PPI premiums added £5,133.

At the heart of the scandal was banks and lenders’ practice of actively mis-selling PPI, though.

Many case studies revealed that accurate customer information wasn’t collected and that PPI – with the chances of successful claims minimised – was sold to unemployed, self-employed or retired whose circumstances meant they wouldn’t be able to make a claim.

Lenders were also accused of piling pressure on their customers to sign up for the added insurance, or simply adding the costs in without telling borrowers.

Given the details of the practice of lenders being incentivised to sign their customers up for PPI, it was little surprise that the public demanded refunds in their droves.

SMALL PRINT: Barings Law’s experts will examine the details of your PPI paperwork and get you back what you have overpaid

Which brings us back to the present day, with banks continuing to make amends. However, the issue of tax on customer refunds is causing a few headaches now. The statutory interest of 8% for each year a customer had the policy is potentially taxable.

Most pay-outs would have 20% deducted, in order to match the basic rate of income tax and to return customers to the position they would have been in had they not been sold PPI.

Because of this it counts as savings interest, as though you’d earned it on your bank account. This applies even if the PPI payout was used to pay off existing debts with the lender, or went towards legal costs, as you are still benefiting in the same way.

The average PPI settlement in the UK is thought to be around £1,700, the biggest an eye-watering £175,000, which was refunded to a Swindon couple in 2019.

That life-changing sum was refunded for mis-sold PPI on three payment cards and a loan.

So how would someone go about making the most of their windfall? With a six-figure sum to invest, here are some of the top options:

Property

Buying property has long been seen as the safest way to invest money, and the ongoing popularity of TV shows such as Homes Under the Hammer only serves to reinforce that theory. The phrase ‘as safe as houses’ was coined for a reason, after all.

Property returns do not appear to have any correlation to investment markets and, while a degree of risk does exist, in the long term, house prices tend to beat inflation figures.

Cash

Typically, the best and safest way to earn a higher rate of interest from a savings account is to tie it down for a long, fixed term.

Instant access accounts are available but they almost always fall short of matching inflation. One viable alternative is to look at the best fixed-rate savings bonds that can provide inflation-beating interest rates and tax-free returns.

The downside to these is that they restrict access to your savings throughout the term of the bond or lead to heavy penalties for withdrawing your money ahead of the end of the agreed term.

Peer-to-peer lending

Simply depositing your cash in a high-interest, low-access account may not do it for you, so you may wish to consider peer-to-peer lending. Banks can (and do) lend their customers’ money to borrowers for profits that help to pay interest.

Peer-to-peer lenders eliminate the middleman and lend to borrowers directly, receiving a higher rate of interest for doing so.

Equities

It is possible to invest directly in shares to receive streams of income via regular dividends. Risk-takers may wish to consider direct equity holdings, as that extra jeopardy comes with greater rewards.

The key to success in equities is knowing when to buy and when to sell, knowing your limits and having a margin of safety in place.

Bonds

In essence, corporate bonds are loans to companies who pay back the loan with interest on an agreed date.

These are also far from risk-free, though safer investment opportunities – including loaning money to the government – are out there. Companies with poorer credit ratings represent more risk but a higher yield for investors and bonds are still thought to be lower risk than investing in equities.

At Barings Law we can’t promise to get you a PPI refund that will make the news headlines, or even buy you a second home. But it’s worth taking just a few minutes to find out what we can do to help you, isn’t it? 

What’s more, we make getting back the money you are owed pain-free. In most cases you can just send us your documents and then sit back while we do all the legwork and fight to get you the compensation you deserve. 

Our team can answer any queries you may have. Contact us on 0161 200 9960 for a free, no-obligation consultation, or click on the floating icon at the bottom-right of this page to start a webchat with one of our customer service advisers.

We make submitting your claim for compensation quick and simple.