Business PPI Claims
Claims for mis-sold Payment Protection Insurance (‘PPI’) policies are well known by now. It is estimated that as many as 64 million policies were sold in the UK between 1990 and 2010, with the banking industry processing millions of PPI complaints and paying out over £32 billion in compensation so far. However, the proportion of this compensation paid out to businesses is little known. This is because Payment Protection Insurance sold to businesses, or ‘Business PPI’ has tended to be less publicised and has received less coverage in the media. Also, there does not appear to be any official statistics available for the business sector and PPI complaints.
Like most PPI policies, Business PPI was sold alongside secured and unsecured loans, overdrafts, credit cards and mortgages. Designed to protect the policyholder from failing to make payment commitments on these financial products in the event of injury, illness or death; the policies were sold by UK banks on a widespread scale as an efficient insurance solution for businesses.
These policies were generally sold by the corporate Relationship Manager to the business from one of the many regional business banking centres across the UK, or on some other occasions, were sold by ‘Treasury’ or ‘Risk Solutions’ specialists to the business.
Key banks that Sold Business PPI Between 1990 - 2010:
- Bank of Scotland
- Lloyds Bank
- Halifax Bank
- Barclays Bank
- Royal Bank of Scotland
- National Westminster Bank
What is a ‘Business’ & What Does it Mean for PPI Claims?
The definition of a ‘business’ can mean different things to different people. In the context of Business PPI claims, a business can be defined as a commercial operation falling into one of the following three categories:
- A business trading as a Limited (‘Ltd’) Company (registered at Companies House)
- A sole proprietor or sole trader
Disclosure of Information
The rules and practices for disclosure of information are different for businesses and consumers. Consumers benefit from being able to take advantage of their banks’ pre-claim disclosure procedure, which means that they are able to check with the bank first to see if they had ever taken out a PPI policy before commencing the complaint process. If their bank does not provide this free PPI checking service, the consumer can fall back on submitting a Subject Access Request (SAR) to their bank and find out whether they had ever taken out a PPI policy. This is because the bank has a statutory obligation to provide their customer with this information once requested.
Unfortunately, the pre-claim disclosure procedure described above does not apply to businesses. Subject Access Request rules also only cover sole proprietors and partnerships of less than 4 people, so many businesses will not be able to submit a Subject Access Request to their bank to find out whether they have ever taken out a Business PPI policy. As an alternative to a Subject Access Request, some banks accept a Request For Information (RFI), but as there is no statutory obligation to back an RFI, the business is, in reality, relying solely on the goodwill of their bank to provide any information to them. What information the bank supplies upon receipt of an RFI, and indeed whether it provides any information at all, tends to vary dramatically between banks. So it may well be the case that a business has taken out PPI in the past and could have a genuine case for the mis-selling of the policy, but it will never know this as it is unable to verify in the first instance whether it ever took out PPI. In this instance the business will need to rely on its own internal records to identify the PPI policy – which could be an issue, particularly if the policy was sold some time ago in the 1990s for example.
Routes For Dispute Resolution
The other key distinction between businesses and consumers that have a PPI mis-selling complaint is the way that they can get the dispute effectively resolved.
In the first instance, consumers are able to take their PPI mis-selling complaint to their bank, and if they are unsatisfied with the outcome, they can elevate the complaint to the Financial Ombudsman Service (FOS) within six months of receiving a Final Response Letter from their bank. Businesses have the same rights as consumers when it comes to complaining to their bank, but not for FOS. This is because there are eligibility criteria when taking a complaint to FOS. Those businesses that have ten or more full-time employees and a turnover of €2 million (c. £1.7 million) or greater in the year of making the complaint, will not be eligible. This means that many businesses will be excluded from FOS as a route to get their Business PPI mis-selling claim resolved. If a business is unsatisfied with the outcome from their bank, that only really leaves resolution through the court process in order to provide justice. This will not always be a practical option given the costs and risks involved in litigation.
Cause Of Action & PPI Claims
In order to make a complaint about PPI mis-selling, or indeed any claim, the business cannot be dissolved. This is because the cause of action for the claim lies with the business entity, rather than with an individual director or person associated with the business; even if the PPI policy was taken out in the name of an individual. In order to claim, a business must be actively trading (registered as ‘Active’ at Companies House). Alternatively, if the business is not active but in administration; then a claim may still be made but it will require the consent and co-operation of the insolvency practitioner or administrator. However, it should be noted than any ultimate payment of compensation for the mis-sold Business PPI product will be awarded to the creditors of the company rather than the company directors themselves.
If the business has been voluntarily dissolved, then it will only be possible to make a complaint by reinstating the company. This is typically a straightforward process that may involve some modest administrative fees but will need to be balanced against the potential amount of compensation payable.
Types of Business PPI Products
One of the key differences in the Business PPI market compared to the Consumer PPI market is the lack of a naming convention. In the Consumer PPI market, people simply talk about “PPI”, in the Business PPI market, the PPI policy may be called something entirely different!
Generally, banks did not sell an insurance product to businesses labelled “Business PPI”, but tended to use their own their own naming conventions depending on the underlying banking product that the PPI policy was attached to. So Lloyds Bank and HSBC Bank could call Business PPI two entirely different things. Common naming conventions used by banks include “PPI”, “Business PPI”, “Commercial PPI”, “Business Loan Repayment Insurance”, “Commercial Overdraft Repayment Insurance”. Although Business PPI was sold alongside loans, mortgages, credit cards and overdrafts; the most popular forms of Business PPI related to loans and overdrafts, which is described in more detail below.
Business PPI Relating To Loans
This type of Business PPI was often called ‘Business Loan Repayment Insurance’ (or “BLRI”). BLRI was typically sold alongside commercial bank loans, or business banking loans such as a Variable Rate Business Loans, Fixed Rate Business Loans, Treasury or Sterling Loans. This type of insurance was used to cover the named person(s) on the policy for accident, illness, and death.
Many BLRI policies were added to the business loan without the businesses prior knowledge or consent. In other cases, the bank may have led the business to believe that in order to take out the loan, Business Loan Repayment Insurance was required. This may have been presented as a condition of the loan by the banks’ Relationship Manager or Treasury specialist when in actual fact it was never a condition of the loan at all.
If your business has taken out a PPI policy relating to a loan, it may be that you have been mis-sold the policy.
Grounds to look out for if you suspect your business may have been mis-sold PPI
- Your bank did not make it clear that Business Loan Repayment Insurance was not a condition of the business loan, but rather an optional extra to the loan that you didn’t need to take
- Your bank added Business Loan Repayment Insurance to your business loan without your consent or knowledge
- You felt pressurized by your bank to take out Business Loan Repayment Insurance
- The cost of Business Loan Repayment Insurance was not properly explained to you at the point of sale of the loan
- Any policy exclusions or limitations of the Business Loan Repayment Insurance were not properly explained to you at the point of sale of the loan
- The suitability of the Business Loan Repayment Insurance was not properly assessed by your bank prior to the policy being sold
- Your bank did not properly explain to you that your business had to operate from the United Kingdom to be eligible for the policy
- Your bank did not properly explain to you that if you cancelled the Business Loan Repayment Insurance, or if you repaid your business loan early; then you might be entitled to a partial refund of the policy premiums
If any of these indications of misselling resonate with you, then there is every chance that you may have been mis-sold your Business Loan Repayment Insurance policy and you should make a claim if you would like to receive compensation.
Business PPI Relating To Overdrafts
Commercial Overdraft Repayment Insurance (CORI) is a form of Business PPI that applies to business banking overdrafts.
Businesses that required overdraft facilities from their bank may have been incorrectly told or misled that they needed to take out CORI in order to be granted the overdraft in the first place. In effect, this left the business with no other option than to take out a CORI policy.
Similar to BLRI, the features of the CORI policy may not have been fully explained by the bank at the point of sale. In other instances of mis-selling, an automatic monthly direct debit may have been deducted from the business account without the business knowing what this payment was for.
Indicators to look for if you suspect that you have been mis-sold a Commercial Overdraft Repayment Insurance policy include:
- Whether the costs of the PPI policy were properly explained to you at the point of sale
- Whether the Commercial Overdraft Repayment Insurance policy was optional to the overdraft facility itself
- Whether it was properly explained to you that your business had to operate from the United Kingdom to be eligible for the Commercial Overdraft Repayment Insurance policy
- Whether it was properly explained to you that the Commercial Overdraft Repayment Insurance policy would incur interest throughout the life of the overdraft
- If any of these potential indications of mis-selling resonate with you, then there is every chance that you may have been mis-sold your Commercial
Overdraft Repayment Insurance policy and you should make a claim if you would like to receive compensation.
You may have good reason to think that you have a claim for a mis-sold Business PPI policy, or you may even just have a slight suspicion. Either way, it will take action in order to claim compensation as your bank will not approach you and inform you that you have been mis-sold and present you with a cheque for the full amount of compensation.
In order to start the claims enquiry process, here is a summary list of some of the key indicators to that will help you identify if you have a potential Business PPI mis-selling claim. Please be aware that this list is non-exhaustive and it may be the case that you have a valid claim for other reasons not contained on the list. Please check with us for further details or if you are unsure.
Mis-Sold Business PPI Indicator
- Did you realise that you ever had Business PPI?
- At the time of sale of the Business PPI policy, did you suffer from any pre-existing medical conditions or were you registered as disabled?
- Did you have any other means of making payments on your loan, overdraft, credit card or mortgage in the event of illness, injury or death such as other insurance policies or personal savings?
- Were you ever informed that Business PPI was an optional extra to the loan, overdraft, credit card or mortgage?
- Were the features, benefits, and risks of the Business PPI policy properly explained to you at the point of sale of the policy?
- Were you told the Business PPI policy was a condition of the loan, overdraft, credit card or mortgage?
- Were the costs of the Business PPI policy and the rate of interest explained to you?
- Were you advised or recommended to take out the Business PPI policy?
- Have you ever missed any payments or gone into arrears on the business account?
- Have you ever made a claim on the Business PPI policy?
- Is the Business PPI policy still running or has it been cancelled?
Compensation Expectations for Mis-sold Business PPI?
In the event that you have been mis-sold your Business PPI policy and your complaint has been upheld, then you could be entitled to receive the following compensation:
- A full refund of all the premiums paid
- A full refund of any interest charged
- An award of compensatory interest calculated as 8% per annum flat on the above amounts
- Consequential Losses due to the business as a result of the mis-selling of the Business PPI policy, this could include loss of business opportunities and any extra payments made by the business because of the PPI policy
- It may be the case that the sums of compensation awarded to businesses for Business PPI mis-selling are significantly higher than the awards made to consumers due to the larger size of transactions that a typical business undertakes compared to a consumer.
Issues & Concerns of Businesses When Claiming for Mis-sold PPI
When making a complaint to their bank for a mis-selling claim, many businesses are concerned about what impact this will have on the wider business banking relationship. Businesses tend to be nervous about whether their bank will withdraw an overdraft facility, demand full repayment of a loan early or fail to extend a much needed line of credit. Although these may seem like valid concerns, from our experience many of these concerns play out to be unfounded for the following reasons:
- The complaint will typically be assessed and investigated by a different division of the bank than where the day to day banking relationship is conducted
- The bank has an obligation to treat their customers fairly and act in their best interests, if they don’t then they will be in breach of banking industry regulations
- Many banks have set aside specific provisions to pay their customers compensation for previous mis-selling misdemeanors
Other Potential Related Financial Claims for Businesses?
In addition to a claim for mis-sold Business PPI, many businesses may also find that they have a valid claim for other mis-sold business banking products. These claims could relate to:
- Mis-sold Fixed Rate Business Loans (where the risks of fixing the interest rate were not properly explained)
- Mis-sold Interest Rate Hedging Products (where the risks of entering into interest rate hedging was not properly explained)
- Mis-sold Foreign Exchange Products (where the risks of entering into unsuitable foreign exchange products were not properly explained)
- Banking Misconduct (claims arising from the misconduct of the bank, particularly for businesses that were passed over to the restricting division of the bank)
What to do if you want to make a Business PPI claim?
The Financial Conduct Authority (FCA) have announced a deadline for making a PPI complaint. The deadline set of the 29 August 2019 applies to both businesses as well as individuals.
For the other business banking claims outlined above, certain time limitations for claiming may apply. These are typically either six years from the date that the financial product was sold or three years from the date of knowledge of a cause to complain.