It was a huge mis-selling scandal spanning much of the past decade. Payment protection insurance (PPI) was meant to secure consumers against the damaging financial effects of ill health or redundancy. Instead it was sold to hundreds of thousands who didn't need it, and it came loaded with unfair charges and exclusions. It's another dark chapter in the history of how UK financial services treat their customers.
Those who feel that they have been mis-sold PPI have been given more time to complain to the Financial Ombudsman Service (FOS). Before this rule change, consumers had a six-month limit for referring PPI complaints, but for some this has been extended by an extra few months, until 27 October 2010.
This temporary extension will affect customers who have already had their original complaints rejected by a company between 28 November 2009 and 28 April 2010. The Financial Services Authority (FSA) has said that the extension has been put in place to prevent complainants from running out of time while the FOS continues its consultation into the way firms deal with these cases.
"The decision to extend the time limit for referring complaints gives people more time to reconsider their position, and ideally we would like to have this opportunity extended to people who complained some time ago," says Vera Cottrell from the consumer organisation Which?.
PPI complaints have given the FOS a huge workload in the past few years, accounting for three out of every 10 new cases referred in 2009/10, up 58 per cent on the previous year.
Some companies told their customers that they needed to take out PPI in order to secure a loan. Even more widespread in the industry was the practice of selling PPI to the self-employed or to those with pre-existing medical conditions who wouldn't be able to claim on their policy. As a result of such mis-selling, the FSA has fined several high-profile names for PPI failings, including Egg, Alliance & Leicester and Swinton.
If you think you may have been mis-sold a policy, the first step is to write and complain to the provider. "This could cover all kinds of things," says Martin James, spokesperson for the FOS. "Some consumers may not have known that taking out a PPI policy was optional, while others may not even be aware they had the policy at all."
Many of these initial complaints will end in rejection, but don't let this deter you. The FOS itself has accused lenders of "deliberately trying to obstruct the ombudsman process" by rejecting all initial requests to reclaim. This is despite the fact that in an overwhelming number of cases, the FOS finds in the consumer's favour, upholding a whopping 89 per cent of cases last year, compared with about half of all financial product mis-selling cases.
On rejection, send a follow-up letter asking for your case to be looked at again and stating that you will take the complaint to the FOS. A formal complaint to the FOS is your next move, as long as eight weeks have passed since your first complaint letter. Usefully, Which? has a free online PPI tool at www.which.co.uk/ppiclaim which will guide you through the process.
About six out of 10 PPI complaints referred to the FOS are by claims-management companies on behalf of consumers. In some cases, however, these companies can charge commission of 25 per cent, plus VAT, and others also levy an upfront fee. But making a claim by yourself is relatively straightforward, and it won't cost you a penny – bar the price of a few stamps.
"We've been very clear from the beginning that there is no advantage to using a claims-management company. It's very much the customer's own perspective that we want, so it's unnecessary to use one and it has no bearing on our decision," says Mr James.
As for the ongoing issue of PPI, the Competition Commission has decided it will go ahead with plans to ban the sale of PPI alongside personal loans, mortgages and credit cards, despite a challenge by Barclays.
Elizabeth Holloway, from Barclays, says: "We still maintain that to prohibit PPI being sold at the point of credit sale, and for a fixed period afterwards, will limit rather than enhance customer options and will result in customers being exposed as unprotected."
EXPERT VIEW: Vera Cottrell from Which?
"There is a clear gap between the number of complaints upheld by the firms and the number upheld by the Financial Ombudsman Service. The industry is still rejecting quite a high number of complaints but the vast majority of people who do go to the FOS have the decision upheld in their favour, so there is a good chance you are entitled to compensation."