It has all gone horribly wrong. Banks are hastily pulling out of a dodgy protection market, mortgage endowment policyholders are about to receive another flurry of red letters, and the Government's intervention in banking has left thousands with worthless shares. As money gets tighter, we not only need to hold on to as much of it as possible – we must be proactive about getting it back.
The constant bombardment of compensation adverts may leave a bad taste in our mouths, but if someone else's mistakes have lost you money or the ability to make it, it could be worth pursuing a claim for compensation, especially in an economic climate like this one.
Getting back unfair bank penalty charges is relatively straightforward, but the ongoing legal battle surrounding them is far from simple. For years, banks and building societies have charged current-account customers high fees, as much as £35-£40, for breaching their borrowing agreements. But industry estimates suggest that the administrative cost to the banks is between £2.50 and £4.50. The Office of Fair Trading decided that this could be considered an unfair contract; the banks disagreed; and the whole issue went to the High Court in a test case. In April last year, the court ruled that bank charges could be governed by the unfair contract rules, which seemed like a win for customers. But the banks have appealed the decision, so the case isn't quite closed yet, and in the meantime the Financial Services Authority has frozen unfair charge claims. But don't let that stop you.
"Anyone who feels that they have been a victim of exceptional charges, or where banks have not heeded your concerns about financial difficulty and just made it worse, may have a case for a charge rebate," says Kevin Mountford of Moneysupermarket.com. "It is a fairly easy process once you have identified the charges you wish to challenge." There are plenty of step-by-step instructions and template letters available online, including at www.moneysupermarket.com and www.moneysavingexpert.co.uk.
"Until the trial finally concludes, and the FSA's freeze is lifted, the banks are not obliged to process your claim unless you are in severe financial hardship," Mountford adds. "But there is evidence that they are putting some through anyway, in anticipation of the decision going against them." He urges people to file claims as soon as possible, as there is a six-year limit on the charges for which you can claim.
Payment protection insurance (PPI)
This week, five of the major high street banks declared that they would pull out of the controversial single-premium PPI market, following a huge mis-selling scandal and millions of pounds worth of fines handed out by the financial regulator. Traditionally, these products have been sold against an unsecured personal loan, in theory paying the customers' monthly repayments if they are no longer able to pay due to an accident, illness or becoming unemployed. But the "protection" usually only lasts a few months, is expensive, and has numerous exclusions that end up making it unsuitable for most consumers. In fact, the consumer group Which? recently found that around 2m PPI policies were sold to people who may never be able to make a claim. Getting a refund, however, is very difficult – not least because of the lack of transparency, the regulator says, in the refund terms and conditions.
"It is a fundamentally bad product and should be withdrawn from the market altogether," says Louise Hanson of Which? "People need to protect their finances more than ever, so providers should be developing products that meet consumers' needs and offer value for money.
"PPI has been widely mis-sold in the past. Anyone with a personal loan should check if they have a single-premium policy, as they could claim their money back." For more information on how to do this, visit www.which.co.uk/ppi.
Overnight, companies have sprung up offering to take on these claims on your behalf. They typically operate on a "no win, no fee" basis, but often demand up to 40 per cent of the recovered amount and may refuse your case if they don't consider it worth their while. Unless you're particularly short on time or have a complicated case, experts recommend doing the simple leg work yourself and keeping 100 per cent of any rebate. Before allowing a company access to your financial details, check their credentials at www.claimsregulation.gov.uk/search.aspx.
Bank shares took another tumble this week; RBS dropped by over 60 per cent. This is bad news for shareholders – but it's even worse for them when banks are nationalised, as in the case of Northern Rock, because the shares become worthless. Traditionally, when a company is nationalised, compensation is paid to the shareholders, but this seems to no longer be the case, says Roger Lawson of the UK Shareholders Association. "This kind of compensation has always been applicable under UK law. In the case of Northern Rock and recently RBS it is clear that the Government is trying to avoid paying it. Assets are being confiscated for nothing." According to shareholders, the Treasury's share-valuation criteria assumes the bank was in administration at the point of nationalisation (which it wasn't), so the shares are valued as worthless.
"And now the Government's latest announcement [to issue further shares in RBS, in order to raise money to pay back the Government's loan] seems only interested in the taxpayer," Lawson adds, noting the move would further devalue shares. "It says nothing about the shareholders, who have been woefully ignored throughout this crisis."
Financial advisers suggest that shareholders sit tight and hope for an improvement rather than sell their shares. Meanwhile, however, the UKSA has launched a campaign, including legal action, to secure compensation for shareholders of Northern Rock and Bradford & Bingley. For more information, see www.uksa.org.uk.
This, of course, is a totally different issue to that of a bank going to the wall with all your savings. In this event, your money should be protected by the Financial Services Compensation Scheme, up to £50,000 per banking license. For more information on recovering savings from a collapsed bank go to www.fscs.org.uk/consumer/how_to_claim/deposits.
Enormously popular in the late 1980s, an endowment mortgage is essentially a double contract – one with a mortgage lender, one with a life insurer. The customer only pays the interest on the capital borrowed, while paying into an endowment policy every month that, ideally, will provide enough money to pay back the capital part of the loan once it matures. The customer's monthly outgoings are usually cheaper than paying off the debt with a standard repayment mortgage, and the policy includes life insurance that will pay out if the customer dies prematurely.
It sounds great. But for this to work, the rate of growth of the endowment needs to be high. Growth predictions for endowment policies were once between 7 and 12 per cent. However, most of the money in endowments was invested in with-profits funds, which have seen their values plummet over the past eight years. Many customers are now facing a significant shortfall.
If yours is an endowment mortgage, you should have received several letters over the past few years re-projecting the value of your endowment policy on maturity, and what you can do if it's less than the value of your loan. The letters are colour-coded – green, amber or red. Amber means that your policy is at risk of not reaching its target, red that it has no chance. Many policyholders received red letters during the last stock market crash, between 2000 and 2003 – and more red letters are being issued following the recent market falls.
If your policy is short, don't hang around: there are strict time limits on when you can complain. Again, lots of companies have emerged offering to help you seek redress, but you can do it yourself for free.
Claims cannot be made for advice given before 28 August 1988, and your policy provider will also have announced a deadline for filing complaints; if it has passed, you may be too late to claim. If you think you have the right to complain, you must first contact the firm with which you have the policy. If you don't know who this is, speak to the Financial Ombudsman Service (0845 080 1800; www.financial-ombudsman.org.uk). If the issue has not been resolved within eight weeks, get in touch with the FOS again, who will demand a dialogue with the insurer on your behalf. Because of the sheer number of claims, it can take between six and nine months to resolve yours.
For more information, go to www.financial-ombudsman.org.uk/ publications/factsheets/mortgage_ endowment_complaints.pdf, or to www.moneymadeclear.fsa.gov.uk/endowments. In the meantime, don't cash in your policy, nor stop monthly payments unless you're advised to do so later down the line.
Personal injury: Making a claim
As the TV adverts put it, if you've had an accident at work, on the road or in a public place that wasn't your fault you may be able to claim compensation. This can include anything from tripping over a paving stone to receiving the wrong treatment in hospital. Any claim for compensation will need to be either for the pain, suffering and loss of future earnings, or actual financial loss, usually through damage to personal property due directly to the incident.
There are a number of ways to pursue your claim: via a claims assessor – usually on a no win, no fee basis; taking legal action in the civil courts; making a claim to the Criminal Injuries Compensation Authority; via a criminal compensation order; or via a government compensation scheme. The amount you receive will depend on the level of injury you sustained, the evidence of the financial losses and to what extent the incident was your fault.
If you do use a claims assessor, they will probably demand a big percentage of your compensation, but you can pursue a claim by yourself or through your existing legal representation. Citizen's Advice has more information on claiming compensation at www.adviceguide.org.uk/index/your_rights/legal_system/personal_injuries.htm.Reuse content