UK consumers are reporting banks who have lodged legal demands to repay the PPI compensation they obtained from their banks.
If you are alarmed by one of these demands here’s a breakdown of your legal rights, proper recourse and if you truly have to pay that miscalculated PPI claim payout.
Who Went Wrong?
Clearly, this situation is not of your own fault entirely. Banks are responsible for proper consumer payout calculations
According to The Financial Inclusion Centre Founder Mick McAteer:
“It’s virtually impossible for individual savers to work out the PPI redress they are due, so it seems unfair to expect someone who has spent this money to pay it back.”
While James Daley, founder of consumer website Fairer Finance, added: “I wouldn’t have thought that these are isolated cases.
FOS: Businesses Can Ask For Its Money Back
Unfortunately, banks have the right to demand their money back if proven it was a miscalculation on their part.
According to the Financial Ombudsman:
“There is no rule to say that a business can’t ask for money back if they have noticed a problem.
“However, if a complaint was brought to us, we would consider what is fair and reasonable.”
What You Can Do
The best recourse for these issues is to understand how to properly calculate your PPI refund and actual PPI compensation.
Remember that PPI compensation is often 8% of your APR total. More in understanding how to calculate your PPI refunds.
If the banks gave you more than your calculations, then you need to give them back their money. If not, then you have a legal leverage on your end.
Third quarter results reveal that four high street banks are increasing their PPI provisions totalling up to £2bn. Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland will be indicating their additional top-ups for their PPI refund and compensation.
According to sources, the £2bn collective PPI provision would be added before the FCA confirmation of a 2019 deadline for PPI claim.
Lloyds is likely to pay more than the other banks. Currently, it has the highest total for PPI compensation reaching about £16bn in total.
The new addition comes despite the perceived slowdown on PPI claims during the first half of 2016 compared to 2015 during the same time period.
PPI compensation payouts are also down by £405.8m in April to £266.8m the following month and even up to £244.6m in July.
Banks are struggling to pay fines for PPI processing issues and other regulation troubles they face during the time. PPI may have also increased due to the Plevin case. The case centred on defining a “substantial” fee where a broker must disclose their commission payment to their customer.
Banks may also pay higher than £2bn in the coming years as the FCA extends its PPI claim deadline to another year.
It might seem like a simple concept to grasp but the meat of the idea about PPI claims and PPI compensation can be quite confusing for the average consumer.
Banks would not make steps to clarify these for you. However, claims managers can tell you more about PPI compensation.
Your PPI claim protects your financing. Often, it costs about 25% of your total financing. For a £20000 personal loan — as an example — that value can be around £3000.
That means your PPI could cost about £325 in yearly APR if it has a rate of 8%. Give or take.
You can calculate your PPI compensation if you take the 8% off your final APR amount. So if you had to pay for PPI in five years, the formula would be:
325 x 5 = 1975
Now, 8% of the £1975 APR total would be your PPI compensation which would be £158
PPI compensation is a Supreme Court order that has banks pay an additional ‘hassle fee’ to consumers who were mis-sold PPI.
If you were mis-sold PPI or need to find out if you were, it would be wise to talk to a claims manager. Better yet, if you have not the time to make your claim, using their no win no fee services is a must.
One might say it’s a no-brainer. Indeed, calculating your PPI refunds is quite easy if you know the formulas.
Things not covered in this short guide are the actual value of your PPI in relation to your loan, credit card or financing and the possible APR you could have.
Here is how to calculate your refunds effectively:
As an example, we’ll say that your payment protection insurance costs about £3000. This is about 25% the value of a £20,000 loan. While this is not true in all cases, this serves as a good starting point.
But that’s just the value of PPI itself. It is refundable but that’s not all you should get.
Your PPI gets an annual percentage rate increase. APRs usually go around 7% to 7.9% yearly. If one calculates the 7.9% of £3000, you have about £395 increasing in your repayments per year.
If you have a PPI policy that ends in repayment within five years, you would have reached about £1975 in total APR. You could add that on top of the £3000 you could refund from your bank.
Lastly, you are also owed at least 8% compensation. PPI compensation — as this is known — is to help you reverse the troubles caused by PPI against yourself. This is calculated with your PPI’s base value.
You have a £3000 PPI
Plus, you have a £1975 APR total for five years.
Plus, you have 8% compensation from PPI, which based on this example is equivalent to £158.
£3000+ £1975 + £158 = £5133.
Every PPI claims manager understands that each PPI case is unique. Local news say that consumers can get an average of £3,500 per PPI mis-sold by their bank.
The truth of the matter is that there’s more than £3,500 for consumers who understand they incurred some additional expenses because of PPI.
Here are three steps to help you get back all your PPI refunds.
Know If You’re Entitled
Any consumer who knows that PPI was attached to any financing they applied and it had bank approval is mis-sold payment protection insurance.
If you’re mis-sold PPI, you are entitled for compensation.
If you’re not sure, check your full credit history. This allows you to read through the report nad find every type of financing you’ve ever had.
This allows you to see if you have taken out any PPI that you don’t know of.
Prepare The Paperwork
Consumers have to prove they purchased the insurance policy. Repayments and billing statements will often do the trick when it comes to paperwork.
Your original terms and condition coupled with your reason for ineligibility (such as medical certificate or discharge certification document dated before the purchase) can help you prove you were mis-sold PPI.
The Lack of Paperwork and Length of Claims
Consumers raise the lack of paperwork and the length of time to create a claim as primary issues that hamper their success in dealing with payment protection insurance.
The truth of the matter is simple — no win no fee claims management companies have special arrangements with banks that allow you to use data access requests.
This allows consumers to peek beyond the normal six-year limit banks impose on consumer documents.
The length of time to claim at this point is irrelevant if you’re using a PPI claims company. They can handle the forwarding and re-forwarding of your PPI complaint effectively.
How does a consumer know they were mis-sold PPI?
A quick call to the bank asking if they are one of the possible mis-sold consumers would confirm it.
Another way is to remember whether their bank representative handling their insurance purchase or financing application told them PPI was optional or they could choose an insurer that would have a product suited for them.
To prove both, you’ll need paperwork. Without paperwork, your claims would be unsatisfactory.
But did you know you could claim PPI without paperwork?
Did you know that most consumers could not make a claim because they lack their paperwork? You may be one of them and this is your chance to succeed.
Banks offer a service called the data access request. This allows consumers to request for information that dates back to more than six years from 2016.
Loans, credit cards and other financing made from 2010 will still have their information preserved. But consumers may have to pay an additional fee of £10 per request.
Some claims management companies have tie-ups with banks that allow them to use the data access request to effectively see whether the prospective consumer could lodge a formal refund claim to their bank.
CMCs can also help them in case banks refuse their claim and they need to re-submit their claim to the Financial Ombudsman Service.