Payment Protection Insurance (PPI) continues to be a major issue for consumers. We are now getting up to 1,500 new PPI cases each day - and PPI complaints represent more than half the total number of complaints referred to us. In fact, we've now received over 400,000 PPI complaints in total.
Our approach to deciding PPI complaints is well established, and our online PPI resource contains all kinds of information and materials to help people working on disputes involving PPI mis-selling. But unfortunately, we still see some financial businesses and claims management companies who don't take our approach into consideration when they are handling, or representing, PPI complaints. This creates unnecessary additional work for everyone - and causes delays.
When we examine a complaint involving the sale of PPI, we look at:
If the business failed to provide information that was clear, fair and not misleading - or failed to ensure its recommendation was suitable - then we consider the impact this had on the customer. This means deciding whether the customer would have done anything differently (for example, chosen not to have taken out the PPI) if the business had met its obligations in providing clear information and making a suitable recommendation.
As the case studies on the following pages show, it is not always clear whether a business simply gave its customer information and allowed them to make their own informed choice - or whether it gave them advice and recommended a policy.
So we consider the evidence, and work out what seems most likely to have happened.
The case studies include complaints relating to:
When Mrs C took out a loan secured on her home, the loan provider recommended that she take out a single-premium payment protection insurance (PPI) policy.
Although she had not needed to make a claim under the policy, Mrs C became concerned about it when a friend told her about a PPI claim he had made - which had been declined because of a so-called"pre-existing medical condition". Mrs C was worried that because she had suffered from asthma for many years, she would not be able to claim if her condition led to her taking time off work.
So she complained to her loan provider about the way the PPI policy had been sold to her - saying she had not been made aware of the exclusions that applied to it.
Mrs C's loan provider rejected her complaint, and she decided to refer her case to us.
complaint not upheld
We listened to a recording of the phone conversation between Mrs C and a call handler at the loan provider. We noted that Mrs C engaged fully with the call handler during the conversation - and often asked him to clarify things she was unsure about.
When she was asked about her medical history, Mrs C told the call handler that she had asthma. When he went on to explain the exclusions that applied to the policy, he referred to her condition specifically - pointing out that any claim relating to her asthma would be excluded. Mrs C replied that she was not worried about this because her asthma was "under control" - and had never caused her to take time off work. So we were satisfied that she had been aware of the significance of the exclusion when she took out the policy.
But given that the business had specifically recommended the policy to Mrs C, we also needed to consider whether this exclusion made the policy unsuitable for Mrs C. We concluded that it did not. After all, she had said she thought it unlikely that her asthma would cause her to make a claim and the policy would have covered her for any new medical condition. So we decided that the potential benefits of the policy, given Mrs C's circumstances, meant that it had been a reasonable recommendation.
Having looked at the evidence, we were satisfied that the loan provider had acted appropriately in recommending the policy - and that Mrs C had made an informed decision when she took it out.
We did not uphold the complaint.
Mr P received a mail shot inviting him to apply for a credit card. He completed the application form - but left a blank space where he was asked to indicate whether he wanted PPI. He returned the application form and received his new credit card a week or so later.
When he called the credit card provider to activate his card, Mr P spoke to a representative on their helpline - and ended up taking out a PPI policy.
He later complained to the credit card provider about the way the policy had been sold to him. He said he had been pressured into taking it out and subjected to a "hard sell". The provider disagreed. It rejected his claim that he had been put under pressure. And it pointed out that its representatives "only provide information" - and not advice - to their customers.
Mr P was unhappy with this response, and referred his complaint to us.
Although the credit card provider was unable to provide us with a recording of the relevant phone call, it did provide us with a copy of the script that the representative would have used.
The script prompted the representative to describe the PPI policy in general terms. If customers said they were not interested, the representative was prompted to use "objection handling guidance" several times "to try and overcome" their objections.
We asked to see the guidance, but the provider was unable to supply a copy.
We could not be sure exactly what was said during the conversation between Mr P and the representative. But the fact that the script referred to "objection handling" techniques suggested to us that the representative had done more than simply provide information. It also lent weight to Mr P's argument that he had been subjected to a "hard sell".
We also needed to establish whether it was likely that Mr P would have taken out the policy had he been given the appropriate information to make an informed decision. So we spoke to him about his circumstances at the time. We found out that he had over 20 years' service with the armed forces. This meant that if he became ill or had an accident, he would have received full pay - and would have been eligible for an army pension if he could not return to work. He also told us that he considered his job had been secure at the time he took out the policy.
We then considered the protection provided by the policy - which would have paid 5% of his outstanding credit balance every month for 12 months. In light of this, we concluded it was unlikely that Mr P would have taken out the policy had he simply been left to make an informed choice.
We upheld the complaint and told the credit card provider to put things right in line with our usual approach.
Mr J was a self-employed dental technician. He wanted a loan to pay for his wedding. Mr J had been self-employed for a number of years and already had some cover in place to protect his income if he found himself unable to work.
He called a loan provider to discuss his requirements. Once the terms of the loan had been agreed, the representative went on to recommend that he take out a single-premium PPI policy. He was reassured that this would protect his monthly payments in the event of unemployment, sickness or an accident. Mr J took out the policy.
He later saw some articles in the press suggesting that PPI may not be suitable for people who are self-employed. He became concerned about the way his policy had been sold to him.
When Mr J complained to the loan provider, it told him that his policy would provide him with unemployment cover. It said it had been a suitable recommendation for him at the time, and rejected his complaint. Unhappy with this response, Mr J brought his complaint to us.
When we spoke to the loan provider, it told us it would be no more difficult for a self-employed customer to make a successful claim under this policy than for an employed customer.
So we carefully reviewed the policy documents that Mr J had been given. We found that for a self-employed customer to be covered if they became unemployed, their "business" would have to "permanently cease trading".
This meant that Mr J would have needed to have stopped working as a dental technician permanently to qualify for unemployment cover - which is very different from temporary unemployment.
We also listened to the phone call during which Mr J and the representative had discussed the policy. We found that unemployment cover for self-employed customers was not mentioned. We pointed this out to the loan provider - and reminded it that the policy had been recommended to Mr J as "suitable for his needs".
The loan provider responded by saying that it had given Mr J literature about the policy. But we noted that this had been supplied after he had made the decision to take it out.
Having considered the evidence, we concluded that the terms of Mr J's policy - in relation to self-employment - amounted to a significant and onerous restriction, and that the loan provider should have brought them to his attention. We also pointed out that the policy had been recommended to Mr J - and that it was the loan provider's obligation to ensure that it was suitable for him.
So he should not have needed to wade through the small print of his policy documents himself to check that it was suitable. In light of the evidence, we took the view that had Mr J been made aware of the implications of the policy, it is unlikely he would have taken it out.
Mr B wanted to buy a motorbike and phoned his bank to arrange a loan. He spoke to an adviser who - once the terms of the loan had been agreed - recommended that he take out PPI. The policy was on a single-premium basis and would run alongside the loan for its three-year term.
A few months later, Mr B was reviewing his outgoings to see where he could make some savings. It struck him how much he was paying each month for his loan - so he looked back at the paperwork to check whether the amount was right.
When he checked his documents, he noticed that his PPI policy had significantly increased the total amount he had borrowed - and that he would only receive a limited refund on it if he decided to repay the loan early.
He decided to complain to his bank that the policy had been mis-sold to him. When the bank rejected his complaint, he referred the matter to us.
complaint not upheld
We reviewed the policy documents sent out to Mr B. We noted that his loan agreements set out the cost of the loan - both with and without the PPI policy. We also noted that they did provide a clear explanation of how a refund would be calculated if he repaid his loan early and cancelled the policy. This included a table showing how much would be refunded if the policy was cancelled after varying periods of time.
Because the bank had recommended the policy to Mr B, we also needed to consider whether it had been an appropriate recommendation for him. We listened carefully to a recording of the phone conversation between Mr B and the adviser at his bank.
During the phone call, Mr B had confirmed that he was a homeowner, that he had two dependants and that he was not entitled to any employee benefits in the event of an accident, sickness or unemployment. He also said that he did not have any other savings or insurance policies.
During the call, the adviser had given Mr B a quote for the loan both with and without the addition of the PPI policy. She had also told him the monthly cost and the amount of interest that would accrue over the term of the loan.
The adviser had gone on to explain to Mr B that the policy might not be suitable if he was looking to keep costs down - or if there was a chance he might repay his loan early. She had explained that if he did this, the refund he would receive would not reflect the amount of time that was left to run on the policy. She also said that he should read the policy literature for more information on refunds.
Later on in the phone call, when Mr B had confirmed that he wanted to take the policy out, the adviser had reminded him of the refund issue. He had confirmed he understood it - and that he wanted to proceed with the policy.
Having looked carefully at the evidence, we concluded that the policy would have been of some benefit to Mr B had he found himself unable to work - and that it was not unreasonable for the adviser to have recommended it. We were also satisfied that the adviser had done enough to highlight both the additional cost of the policy, and the fact that a refund would not be on a "pro rata" basis if he decided to cancel the policy early.
Miss N's grandparents had been renting their home for 40 years. When the owner of the property put it on the market, Miss N decided to buy it. She planned to carry on living in her own home while her grandparents would continue to live in the property.
She went into her bank to explain her situation. Having discussed her requirements with an adviser, Miss N took out a mortgage. She was also given an application form for a PPI policy - which she completed during her appointment with the adviser.
Unfortunately, some time later Miss N lost her job and made a claim under her policy. This was declined because she was not living in the property - and was therefore not eligible under the terms of the policy. Miss N complained to her bank, saying that she had not been made aware of this restriction.
The bank responded by saying that Miss N had not made it clear that she would not be living in the property. It went on to say that it had not recommended that Miss N take out the policy - but that it had given her information to enable her to make her own decision. It also pointed out that it had sent her detailed policy documents in the post.
Unhappy with this response, Miss N brought her complaint to us.
When we reviewed the policy documents that had been sent to Miss N after she had taken out the policy, it was clear that the policyholder must live in the property to be eligible for cover.
But we needed to decide whether this had been made clear to Miss N before she had taken out the policy. When we looked at the documents she had been given, we found that they did not contain clear information about eligibility criteria.
We also looked at the events leading up to her decision to take out the policy. We concluded that the adviser who helped arrange her mortgage would have known that she did not intend to live in the property herself. When this same adviser went on to help her with her PPI application form, we thought that they should have explained to Miss N that she would not be eligible for cover under the policy.
Although the bank may not have recommended the policy to Miss N, we decided that it had not given her sufficient information to make an informed decision about whether the policy was suitable for her.
In these circumstances, we upheld the complaint - and told the bank to put things right in line with our usual approach.
Mr and Mrs T wanted to reduce their debts by consolidating them into a single loan. They phoned a loan provider and discussed their requirements with an adviser. The adviser recommended a £28,000 loan with a repayment period of 25 years.
Given the length of the repayment term, Mr and Mrs T wanted to make sure they would be protected if they went on to experience financial problems in the future. The adviser recommended that they take out a single-premium PPI policy. Mr and Mrs T followed his advice and took out both the loan and the policy.
When they looked back at their paperwork later on, they were surprised to discover that their PPI policy had been set up over a five-year term. They felt this had not been explained to them properly and they complained to their loan provider.
They also said that they had not been made aware of the total cost of the policy - or what they would get in return for their money.
The loan provider rejected their complaint, saying they had been given all the information they needed to make a decision about the policy. Unhappy with this response, Mr and Mrs T referred their complaint to us.
To establish the facts of the case, we listened to a recording of the conversation between Mr and Mrs T and the adviser. We noted that the adviser spoke very quickly and moved rapidly from one matter to another. And Mr and Mrs T were not given the opportunity to ask questions or raise concerns.
The adviser mentioned only briefly the total cost of the policy - and did not tell Mr and Mrs T what their monthly repayments would be without the PPI. This meant they could not have worked out that the policy would increase their monthly repayments by 25%. The adviser mentioned only briefly the fact that the policy would provide cover for just five years.
And he did not explain that any further cover would come at an additional cost.
As the conversation went on, it became clear to us that Mr and Mrs T had not realised that they would be paying for the five-year policy (plus interest) over the full 25-year term of the loan.
We then compared the benefits of the policy with what it would cost. We noted that even if Mr and Mrs T had made a successful claim and the policy had paid out continuously for the full five years, the total amount they would have received could only ever have been £200 more than the total amount they would have paid for the policy - over £16,000 in total - in the first place.
Having reviewed the facts of the case, we concluded that the way the adviser had handled Mr and Mrs T's call had made it very difficult for them to make an informed decision about the policy. We concluded that had the terms and implications of the policy been explained to them, it is unlikely they would have taken it out.
Mrs R was experiencing financial difficulty, and was getting increasingly worried about how she was going to cover her monthly outgoings. She decided to go into the local branch of her bank to talk things through with them.
She explained her situation to an adviser, who recommended that she take out a single loan to pay off all her other debts, and a PPI policy to cover the new loan. She paid for the PPI policy on a one-off, upfront basis (single premium), costing her an extra £4,000 over the full term of the loan.
Three months into the new loan, Mrs R was already struggling financially, and she became concerned that the cost of her new PPI policy had not helped.
Mrs R complained to her bank. She said that rather than helping make her debts more manageable, the policy meant that the costs had only increased. She added that the bank had ignored the fact that she needed to keep costs down - even though she had told them repeatedly that she was having financial problems. The bank rejected her complaint and she referred her case to us.
There were very limited records of what had happened when Mrs R took out her loan, but we listened both to her side of the story - and to what the bank had to say. Based on what they both told us, we decided that, on balance, it was likely the bank would have known about her financial circumstances and difficulties and should have taken them into account before it recommended that she take on an additional £4,000 of debt. It was, after all, clear to the bank that Mrs R was consolidating a number of existing debts to bring costs down, and she had gone into the branch specifically to get help with managing her finances.
Taking everything into consideration, we were not satisfied that the bank had given Mrs R a clear explanation of the cost of the policy - or how it would affect her overall finances. Given her situation, we decided the bank should have taken more care to ensure she had understood the implications of taking out the policy. We thought it unlikely that she would have taken the policy out had it done so.
We told the bank to put things right in line with our usual approach.
In 1995 Mr S went into the local branch of his bank to apply for a credit card. At the same time, he took out a regular-premium PPI policy, which he would pay for on a monthly basis.
Some years later, Mr S heard something on the radio about the mis-selling of PPI. He thought about his own policy and decided to find out a bit more about it. He couldn't find the original paperwork he had been sent, so he looked back at some credit card statements and noticed that he was still paying a monthly premium.
Although he couldn't remember many details about how he had come to take the policy out, he was still concerned about it. He decided to complain to his bank, saying that it had mis-sold him the policy. When his bank rejected his complaint, he referred the matter to us.
complaint not upheld
When we investigate any complaint, we have to make sure we assess the evidence carefully to come to a fair decision. Unfortunately, in this case there was only limited paperwork for us to go on - and the recollections of what actually happened on both sides were sketchy.
Even so, we were able to build up a picture of some of the basic facts by looking into Mr S's personal and financial circumstances at the time. When he had taken the policy out, Mr S had been the main wage earner in his family and had three dependants. He had only been entitled to limited sick pay and would have had no other way of making his repayments if he had found himself unable to work.
We also asked the bank to show us an example of the paperwork that would have been given to customers like Mr S, who took out a policy in its branches in 1995. This included the policy document that set out the cost of the cover - and the amount that would be paid in the event of a successful claim.
We noted that in the event of a successful claim, Mr S's outstanding credit card balance would have been reduced by 10% each month - and repaid in full after 12 months.
We also checked whether there were any other reasons why the policy may not have been suitable for Mr S. We found that he did not have any pre-existing medical conditions or any other issues that would mean he could not benefit fully from the cover.
So while we couldn't establish exactly what Mr S had been told when he took the policy out, taking into account his personal circumstances and the benefits of the policy, there was little to suggest that it might not have been suitable for him at the time. In these circumstances, we did not uphold the complaint.
Mr and Mrs L wanted to buy a new car and contacted a loan provider to discuss their requirements. They took out a loan for £5,000, together with a single-premium PPI policy. The policy would run alongside the loan for its full term and would cost £1,000.
After the money from the loan had arrived in their account, Mr and Mrs L checked their paperwork to remind themselves how much they would be paying each month. They were puzzled as to why there were separate documents for their loan and a PPI policy - when they had thought it was all part of the same thing. So they did some research on the internet and discovered that, generally, insurance like PPI was separate from a loan - and was usually optional.
So they complained to their loan provider. They said they had not been told that the policy was optional - and had thought it was a requirement to get their loan agreed. When their loan provider rejected their complaint, Mr and Mrs L referred the matter to us.
We asked the loan provider to give us a recording of the phone call during which Mr and Mrs L had taken out the policy. The provider could not give us a recording - but it did supply a copy of the script that would have been used by its representative.
We noted that the script prompted the representative to discuss loan protection before the loan had been approved in principle. We decided that this could have led Mr and Mrs L to believe that they had to take out the policy to get their loan agreed.
The script did not prompt the representative to ask the customer if they actually wanted the policy. And it prompted them to quote a single total figure that already included the cost of PPI. We felt this could have led Mr and Mrs L to believe that the policy was a standard addition to every loan.
Next, we looked at the loan agreement and the policy documents that had been sent to Mr and Mrs L. We found that the documents did not clearly present the policy as optional. In fact, the section about the policy had already been filled in by the loan provider.
When we spoke to Mr and Mrs L, they told us that the loan provider had delivered the documents to them by courier - who had waited for their signature before returning the signed documents to the loan provider. So we decided that the loan provider had not given Mr and Mrs L sufficient time to review the documents - or to think about whether to take the policy out.
Finally, we took into account the couple's circumstances at the time they had taken the policy out. Mr L had worked on a construction site. He would have been entitled to 12 months' full pay if he became unable to work due to sickness - and his employer also provided life assurance.
Having reviewed all the available evidence, we took the view that the policy had been mis-sold to Mr and Mrs L. At no point had it been presented to them as optional, and they had not been given the appropriate information - or time - to find this out for themselves. In view of their circumstances at the time, we decided that had it been made clear to them that the policy was optional, it is unlikely they would have taken it out.
We told the loan provider to put things right in line with our usual approach.
Mrs A wanted to make some extensive improvements to her home. She thought about different ways of borrowing the money she needed, and decided to look into changing her mortgage. She went into the local branch of her building society to discuss her requirements. Following a discussion with an adviser, she took out a new mortgage - and a regular-premium PPI policy, payable on a monthly basis.
Mrs A later complained to the building society that she did not need the policy and should not have been advised to take it out. When the building society rejected her complaint, she referred the matter to us.
complaint not upheld
To get to the bottom of what had happened, we asked Mrs A to tell us how exactly she had reached her decision to take the policy out. We also spoke to the building society. Having listened to both accounts, we decided that Mrs A had been given advice by the building society. So we needed to decide whether this advice had been appropriate for her.
When we looked at the policy documents she had been given, we noted that they set out the cost of the policy separately from the mortgage repayments. And under the terms of the policy, Mrs A's monthly mortgage repayments would have been made in full had she ever found herself unable to work or made redundant.
Mrs A told us that when she had taken the policy out, she had been the main wage earner in her household, with two dependants. Although she had been in good health and in full-time employment, she had only been entitled to statutory sick pay. And she had no other insurance policies or savings that she could have drawn on to make her mortgage repayments if she had found herself unable to work.
In light of these circumstances, we decided that it had been reasonable for the building society to recommend the policy to Mrs A. After all, she was taking on a substantial financial commitment - and if she had defaulted on that commitment, she would have risked losing her home.
Mr F took out a credit card with his bank - and a PPI policy at the same time.
Some time later, he visited his GP and was signed off as unfit to work. So he went into a branch of his bank and said that he wanted to claim under his PPI policy. The bank told him that he would receive a claim form in the post - and it contacted the insurer to let them know that he would be making a claim.
Mr F's claim was subsequently turned down. The insurer said it related to a "pre-existing condition" - and that he was not covered.
Mr F complained to his bank. He said that had he known the policy would not cover his condition, he would never have taken it out. He also argued that his claim had been handled incorrectly and unfairly - and disputed the medical evidence used by the insurer.
The bank did not agree. It said it had acted correctly in selling Mr F the policy. He remained unhappy, and referred his complaint to us.
consumer advised on how to proceed with claim
When we spoke to Mr F, it was clear that he was extremely frustrated by what had happened. He had expected the policy he had taken out to cover him in exactly this sort of situation - and therefore believed the policy must have been mis-sold to him.
We contacted his bank and listened to its account of the situation. It also provided some written information, which we looked through carefully. We came to the conclusion that the bank had acted appropriately in recommending and selling the policy to Mr F.
However, from what Mr F had told us about his medical condition, we thought it might be possible that his policy did in fact cover him. So we explained to him that the bank was only responsible for responding to his complaint about the sale of the policy - and was not responding to his complaint about his claim being turned down. We suggested he take his complaint forward with the insurer.
Some weeks later, Mr F contacted us to say he had acted on our suggestion - and that the insurer had upheld his complaint and settled the claim to his satisfaction.
Miss W had several credit cards and owed a total of £13,000. She decided that she needed to reduce her monthly outgoings. So she applied for a loan to consolidate her debt - and to borrow an extra £2,000 to pay for repairs to her garage. She contacted a loan provider by phone to discuss her requirements - and went on to take out a loan to cover the total amount. She also took out a single-premium PPI policy.
When Miss W re-mortgaged her property a year later, she decided to consolidate all her debt into her mortgage - and repaid her loan. She was surprised to find that the refund she received for her PPI policy was significantly less than the original premium - even though it had only been in place for a short time.
Miss W complained to the loan provider, saying she had not been made aware of the total cost of the policy - or that a refund would be so small if she repaid her loan early. The loan provider disagreed. It said that she had been made aware of both the cost of the policy and its cancellation terms. Unhappy with this response, Miss W brought her complaint to us.
We looked carefully at the evidence. The loan provider was unable to give us a recording of the phone call during which Miss W had taken out the policy. But it did give us a script that would have been used by its representative.
We noted that the script only prompted the representative to mention the one-off, upfront cost of the policy - and the fact that "it would attract interest". We saw nothing to suggest that the representative would have stated the total cost of the policy if it ran its full term. And we saw nothing to indicate that Miss W would have been told how much the insurance premium would affect her monthly repayments.
As Miss W had originally set out to reduce her monthly outgoings, we thought that the total cost each month would have been an important consideration for her when she was deciding whether to take out the policy.
As far as the refund on early cancellation was concerned, the script did not prompt the adviser to explain to Mrs J how a refund would be calculated if she repaid the loan early. It seemed from the script that she would simply have been prompted to read through all the policy terms and conditions when she received them.
So we looked at the policy documents that were sent to Miss W after she had spoken to the loan provider. We found that the refund she would have received if she cancelled the policy early was calculated as a percentage of the original premium - and the percentage would depend on how long the policy had been in place.
This meant that a refund would be significantly less than "pro rata" - where a policyholder would effectively pay only for the length of cover they had received. For Miss W to have found this out, she would have needed to refer to a table in the appendix section of the document and work it out for herself.
We concluded that neither the representative nor the policy documents had made the details of a refund sufficiently clear to Miss W. And given that she had already consolidated her finances once before - and seemed to be regularly looking for ways to reduce her monthly outgoings - we concluded that she would have been unlikely to have taken out the policy had she been fully informed about what it involved.