What is Payment Protection Insurance (PPI)?
What is Payment Protection Insurance (PPI)?
Payment Protection Insurance (PPI) is a type of insurance policy designed to help you cover loan or credit repayments if you’re unable to make them due to certain unexpected events. Typically, PPI steps in if you lose your job, become ill or have an accident that prevents you from working, or in some cases, if you die. The aim is to give you peace of mind that your debts will be managed even if your circumstances suddenly change.
PPI has been commonly sold alongside a range of credit products, including:
Personal loans
Credit cards
Mortgages
Car finance agreements
Store cards
When you take out a loan or open a credit account, you may have been offered PPI as an additional product. Sometimes, PPI was added automatically without customers realising, which has led to widespread complaints and claims for compensation.
How does PPI work?
If you have PPI and something happens that means you can’t work – such as being made redundant, suffering a serious illness, or having an accident – you can make a claim on the policy. If your claim is accepted, the insurance will pay your monthly repayments for a set period, typically up to 12 or 24 months, depending on the policy. Some PPI policies also offer cover if you die, paying off the remaining balance owed.
However, it’s important to know that PPI policies often come with exclusions and limitations. For example, some policies may not cover self-employed people, pre-existing medical conditions, or certain types of unemployment. This is one of the reasons why PPI has been at the centre of so many complaints.
If you’re unsure whether you had PPI or want to know more about how it works, the Financial Ombudsman Service provides a detailed guide on Payment Protection Insurance (PPI). This resource explains what PPI is, how to check if you had it, and what to do if you think there’s a problem with your policy.
Understanding the basics of PPI is the first step if you’re concerned about how it was sold to you, or if you think you might have been affected by mis-selling or unfair charges. If you suspect you have a PPI policy and want to know your rights or how to make a complaint, explore the rest of this page for practical advice and guidance.
Common Problems with PPI Policies
Common Problems with PPI Policies
Payment Protection Insurance (PPI) was designed to help cover repayments on loans, credit cards, or mortgages if you became ill, lost your job, or experienced other difficulties. However, many people across the UK have faced significant problems with their PPI policies. Understanding these common issues can help you recognise if you’ve been affected and what steps you might take next.
Mis-selling of PPI
One of the most widespread problems with PPI has been mis-selling. Many customers were sold PPI without a clear explanation of what it covered, how much it would cost, or whether it was suitable for their needs. In some cases, people were told that PPI was compulsory, or it was added to loans or credit cards without their knowledge. Others were sold policies even though they would never have been able to claim – for example, if they were self-employed, retired, or had pre-existing medical conditions that were excluded from cover.
If you think you were mis-sold PPI, you have the right to complain about mis-sold PPI and may be able to claim compensation. For further information on how PPI was regulated and the role of the Financial Conduct Authority (FCA), you can read their detailed guidance.
Unfair Charges and High Premiums
Another common issue is the presence of unfair charges or unexpectedly high premiums. Some customers only discovered the true cost of their PPI when reviewing their loan or credit card statements. In many cases, the premiums were added as a lump sum to the loan amount, increasing the total interest paid. Others were charged ongoing premiums without a clear breakdown or explanation of the costs involved.
If you believe you were not made aware of these charges, this could also be grounds for a complaint.
PPI Commission Fees
Many PPI policies included high commission fees paid to banks or lenders, often without the customer’s knowledge. In some cases, more than half the cost of a PPI policy went towards commission, rather than providing cover. This lack of transparency has led to a number of successful claims for refunds.
If you suspect you were charged excessive commission on your policy, you may have a right to complain about PPI commission and seek compensation for any unfair costs.
Confusing Policy Terms and Conditions
PPI policies are often complicated, with terms and conditions that can be difficult to understand. Many people found it hard to work out what was actually covered, what exclusions applied, or how to make a valid claim. This confusion has left some customers paying for cover they could never use, or missing out on benefits they were entitled to.
If you struggled to understand your policy or were not given clear information, this may indicate that the policy was not sold in a fair and transparent way.
Unfairly Rejected Claims
Some customers have faced problems when trying to make a claim on their PPI policy, only to have it rejected for reasons that were not properly explained or justified. Common reasons for rejection include undisclosed exclusions, technicalities in the policy wording, or administrative errors. If your claim was turned down and you feel it was unfair, you may have grounds to challenge the decision.
If you are experiencing any of these problems, it is important to understand your rights and the steps you can take. For more detailed guidance on PPI, including your legal protections and how to avoid scams, visit the Financial Conduct Authority (FCA).
If you believe you have been affected by any of these issues, you can explore how to complain about mis-sold PPI or complain about PPI commission to seek redress. Understanding your options can help you take control and address any unfair treatment related to your PPI policy.
Your Rights Regarding PPI
Your Rights Regarding PPI
If you have ever taken out a loan, credit card, or mortgage in the UK, you may have been offered Payment Protection Insurance (PPI). Understanding your rights around PPI is important, especially if you believe you were mis-sold a policy or faced unfair charges.
The Right to Clear Information
Before you agree to buy PPI, UK law requires that providers give you clear, honest, and complete information about the policy. This means they must explain:
What the PPI covers and any significant exclusions
How much it costs, including how payments are made
Whether the insurance is optional or required
Financial services providers must follow rules set by the Financial Conduct Authority (FCA), which are designed to protect consumers from being misled or pressured into buying insurance they don’t need. If you were not given enough information to make an informed choice, you may have grounds for complaint.
The Right to Cancel or Complain
If you discover that PPI was added to your account without your knowledge or you were misled about its benefits, you have the right to complain. Many people were sold PPI policies that were unsuitable for their circumstances, such as being self-employed or having pre-existing medical conditions that made the cover invalid.
You also have a cooling-off period – usually 30 days from when you receive the policy documents – during which you can cancel PPI and get a full refund. After this period, you may still be able to cancel, but the refund might be partial.
If you believe your PPI was mis-sold, you can make a formal complaint to the provider. If you are unhappy with their response, you can escalate your case to the Financial Ombudsman Service, which offers independent help for consumers.
How UK Law Protects You
UK consumer protection laws, including the Financial Services and Markets Act 2000 and rules enforced by the FCA, are designed to stop unfair insurance practices. These rules require financial businesses to treat customers fairly, provide clear information, and handle complaints properly.
If a provider fails to follow these rules, you may be entitled to compensation or a refund of your PPI payments. The FCA’s guidelines on mis-selling mean that even if you agreed to PPI at the time, you could still have been treated unfairly if important details were not explained or if you were pressured into buying.
Time Limits and Deadlines for Complaints
The deadline for making a PPI complaint to most businesses was 29 August 2019. However, there are some exceptions, such as if you only recently discovered you had PPI or if the provider failed to respond properly to an earlier complaint. The Financial Ombudsman Service can help you understand if you still have a valid claim and what steps to take next.
If you think you have been affected by PPI issues but missed the deadline, it’s still worth seeking advice. In some cases, you may still be able to challenge unfair practices, especially if you were not aware of your rights at the time.
For more information on your rights and how to deal with similar issues, see our guide on problems with insurance policies. Understanding the broader context can help you protect yourself and make informed decisions about your financial products.
How to Make a Complaint About PPI
If you believe you were mis-sold Payment Protection Insurance (PPI) or have been unfairly charged, you have the right to make a complaint and seek compensation. Here’s a step-by-step guide to help you through the process:
1. Check If You Have a Case
First, consider why you think your PPI was mis-sold or unfairly charged. Common reasons include:
You were told PPI was compulsory to get a loan or credit card.
The policy was added without your knowledge or consent.
You were not told about exclusions or limitations that made the policy unsuitable for you (for example, if you were self-employed or had a pre-existing medical condition).
You were not given clear information about costs or terms.
Gather any documents you have about your loan, credit card, or insurance policy. Look for statements, agreements, or letters that mention PPI.
2. Contact Your Lender or Insurance Provider
You should first complain directly to the bank, lender, or insurance company that sold you the PPI. They are required by law to review your complaint fairly and respond within eight weeks.
When making your complaint, clearly explain why you believe the PPI was mis-sold or unfairly charged. Include:
Your account or policy number
The date you took out the product
Details of what you were told (or not told) at the time
Copies of any supporting documents
For detailed instructions on how to complain about mis-sold PPI, visit our dedicated guide.
3. Keep a Record
Keep copies of all correspondence and notes of any phone calls, including dates, times, and the names of people you spoke to. This information can be important if you need to escalate your complaint later.
4. What Happens Next?
Your lender or provider should respond within eight weeks. If your complaint is upheld, you should receive a refund of the PPI premiums, plus interest. If they reject your complaint or you are not satisfied with their response, you have the right to take your complaint further.
5. Escalating Your Complaint
If you’re unhappy with the outcome, you can ask the Financial Ombudsman Service to review your case. The Ombudsman is an independent body that resolves disputes between consumers and financial businesses. They will consider whether the PPI was mis-sold based on the evidence you provide and the circumstances of your complaint.
To understand how the Ombudsman assesses these cases, see the Financial Ombudsman Service guidance on PPI mis-sale complaints.
You must usually refer your case to the Ombudsman within six months of receiving your lender’s final response. For more information on taking your PPI complaint further, including what to expect and how to prepare, see our step-by-step advice.
Taking action can feel daunting, but following these steps gives you the best chance of resolving your PPI complaint successfully. If you need more help, explore our related guides or seek independent advice.
What to Do if You’re Struggling Financially After PPI Problems
If you’re facing financial difficulties after problems with Payment Protection Insurance (PPI), it’s important to know you’re not alone and that there are practical steps you can take to get back on track.
Explore Your Financial Support Options
First, review your current financial situation. If you’re unable to pay essential bills – such as rent, mortgage, energy, or household expenses – because of PPI issues, you may be entitled to extra help. The UK government offers support through benefits like Universal Credit, which can provide monthly payments to help with living costs. You can apply if you’re on a low income, out of work, or unable to work due to health reasons. The application process considers your circumstances, savings, and income, so it’s worth checking your eligibility as soon as possible.
Managing Debts and Speaking to Service Providers
If you’re struggling to keep up with payments, don’t ignore the problem. Contact your creditors or service providers as soon as you can. Many companies have dedicated teams to support customers facing financial hardship. For example, if you’re struggling to pay your phone, internet, or TV bill, most providers offer payment plans, temporary payment holidays, or can help reduce your monthly costs.
It’s also a good idea to make a list of all your debts and prioritise the most urgent ones, such as rent, mortgage, or council tax. These are known as ‘priority debts’ because missing payments can lead to serious consequences. Less urgent debts, like credit cards or overdrafts, should still be addressed, but focus on the most pressing bills first.
Practical Steps You Can Take
Speak to your lenders: Explain your situation and ask for breathing space or a revised repayment plan. Under the Financial Conduct Authority (FCA) rules, lenders must treat you fairly if you’re in financial difficulty.
Review your budget: Check your income and outgoings to see where you can cut costs. Small changes, like cancelling unused subscriptions, can make a difference.
Seek advice early: The sooner you act, the more options you’ll have. If you’re unsure where to start, speaking to a debt adviser can help you make a plan.
Your Rights and Further Support
If your financial problems are directly linked to mis-sold PPI or unfair charges, you may be entitled to compensation. This could help cover some of your financial shortfall. Even if your complaint is ongoing, you should still contact your creditors to let them know about your situation.
Remember, you’re not alone in facing these challenges. There are several routes to support, including government benefits like Universal Credit and help from your service providers if you’re struggling to pay your phone, internet, or TV bill. Taking action early can prevent the situation from getting worse and help you regain control over your finances.
Related Issues and Further Help
Dealing with Payment Protection Insurance (PPI) problems can often highlight wider issues people face with other types of insurance. For example, mis-selling, unclear policy terms, and unfair charges are not unique to PPI – they can occur with car, home, travel, and life insurance too. If you’ve had trouble with PPI, you may be at risk of similar problems elsewhere, especially if you’re unsure about what your policy covers or if you’re struggling to get a fair payout.
If you’re experiencing difficulties beyond PPI, such as being refused insurance, facing unexpected exclusions, or having a claim unfairly rejected, it’s important to understand your rights. In the UK, insurers must treat customers fairly under the Financial Conduct Authority (FCA) rules. This means they must provide clear information, not mislead you, and handle complaints properly. If you believe you’ve been treated unfairly, you have the right to make a formal complaint to your insurer. If they don’t resolve the issue, you can escalate your complaint to the Financial Ombudsman Service.
For broader guidance on issues like policy cancellations, premium increases, or disputes over claims, visit our page on problems with insurance policies. This resource explains your legal options and what steps you can take if you’re unhappy with how your insurer has handled your case.
If you’re struggling to get insurance in the first place – perhaps due to your age, health, or financial situation – there are specific rules to protect you from unfair discrimination. You can learn more about these challenges on our page about problems getting insurance, which offers practical advice for improving your chances of getting cover.
If you need further help or legal advice about PPI or other insurance issues, consider speaking to a specialist adviser or solicitor. They can help you understand your rights, review your policy documents, and support you through the complaints process. Remember, you don’t have to face these problems alone – there are clear rules in place to protect you, and help is available if you need it.
