payment protection insurance

Thousands of people are thought to have been mis-sold payment protection insurance. The good news is you could be entitled to a refund. Read our guide to making a complaint and download a template letter to help you get a refund.

1 Do I have a valid claim?

Payment protection insurance (PPI) is optional and will not improve your chances of getting credit. However, the Competition Commission's investigation into PPI found many people are not aware of this. If you bought PPI alongside a mortgage, credit card, loan, store card or other credit agreement, and were not told it was optional, then you could be entitled to a refund.

Additionally, if, when you took out your loan or credit card, the cost of the PPI element and how it worked was not properly outlined or - as on some internet application forms - the PPI box was pre-ticked, you may have a case.

If you didn't have a job, or were retired or self-employed when you were sold the policy - or had a pre-existing medical condition - and the exclusions on the PPI weren't explained to you, then you could have a claim. Most policies have an age limit of 65 or 70 so if you were over the maximum age when you made the purchase then you too could potentially receive a refund.

Finally, if you weren't aware that the PPI policy would expire before you finished repaying your loan - effectively leaving you without cover - then again you could claim a refund.

2 Does the type of premium make a difference?

If you have a single premium policy, rather than regular premium, this may also be the foundation for a refund. The Financial Services Authority (FSA) and PPI lenders agree in March 2007 that borrowers who had cancelled their single premium policies should be refunded, overturning a previous no-refund policy on these contracts. This means that if you've cancelled a single premium policy for any reason, you can now claim a proportional refund, plus interest.

The Financial Ombudsman Service says the majority of complaints that it upholds are related to single premium policies sold on unsecured loans.

3 How can I get a refund?

Write to your lender (with a copy of the FSA announcement if it's a single premium policy) and ask for a review. You can download a template letter below.

If it rejects your request, take the matter to the Financial Ombudsman Service. If you want to check the costs of your policy, ask your lender to send you a breakdown of your account - without paperwork a refund is unlikely. Don't use a third party reclaim company, as it will take a large chunk of any compensation.

4 What are my chances of compensation?

So far, the ombudsman has upheld around 80% of PPI cases, so you stand a good chance if your claim is fair. If it's a mis-selling claim you're entitled to a full refund; if it's a single premium policy you can get your interest repaid. However, if you've already received a payout on your policy you won't be eligible for a refund.