Car Finance PPI Claims
What is Car Finance PPI?
Getting a loan to help us buy the things we want has become commonplace especially for big items such as cars.
Most car sales in the UK involve some kind of finance. If you purchased a car in the last few years using any kind of finance from a dealership or other type of car loan, you may have been offered an option to cover your repayments, if you were ever unable to work due to illness or if you lost your job.
The cover, called Payment Protection Insurance (PPI), ensured that you did not face any penalties for missing a loan instalment, by making the payment for you if you met the full criteria set by the insurance company.
When the loan was taken out, you would have been asked a few questions to assess if PPI was suitable for your needs. Sometimes the right questions were not asked, or they didn’t go into enough detail, so the assessment may not have been accurate.
Many people took out PPI policies not knowing that they could have purchased a policy from another provider that may have suited their needs better and possibly at a cheaper rate.
It is important to read the small print in these documents as this is where the qualifying criteria of the cover is set out and the circumstances in which it will pay to cover your loan. As with all insurance policies there will be a set of exclusion clauses, so it is important to be aware of what they are and if any of the exclusions apply to you.
Types of loans and vehicles PPI was sold on
The types of finance agreements that PPI was sold with include hire purchase agreements (HP) and personal contract plans (PCP).
These forms of finance are often used to purchase:
Brokers who sold PPI with Car Finance
A lot of car finance loans were set up by car dealerships and other car garages who act as brokers when arranging finance for their customers. Unbeknown to the customer buying a car, caravan or motorbike etc., PPI was often added to the loan.
Many such brokers who not only sold the vehicle but also provided the finance with the PPI were not regulated by the Financial Services Authority (FSA). The consequence of this was that these types of brokers were not covered by FSA regulations on mediation of insurance.
The situation changed when the FSA's remit was widened to include the regulation of companies who sold PPI and other insurance products, this came into effect on 14 January 2005. Therefore all insurance providers must, after this date, have procedures in place to deal with insurance complaints including PPI.
Which Lenders Sold PPI with Car Finance Loans?
The following list of car finance providers are known to have mis-sold PPI on car finance loans:
- Bank of Scotland
- Black Horse
- Clydesdale Bank
- First Direct
- Halifax Bank
- Lloyds Bank
- Lloyds TSB
- PSA Finance UK (covers Peugeot Financial Services and Citroen Financial Services)
- Royal Bank of Scotland
- Welcome Finance
- Yorkshire Bank
This is not an exhaustive list of car loan lenders that included PPI with the finance. If you dealt with a firm not listed above or in the lender pages, please contact us for further assistance.
Car finance PPI Charges & Costs
There are two ways in which car finance PPI is sold and charged for but this depends on which product it was sold with; Single Premium car finance PPI and Monthly Premium car finance PPI.
Single Premium Car Finance PPI - These policies charge an upfront premium that covers the insurance cost. The premium is added to the sum borrowed and interest is then charged on the PPI premium and on the loan. The customer therefore repays not only the monthly loan repayment but also the premium and the interest on it.
What customers may not know about single premium PPI policies is that they don't cover the duration of the loan, it usually only covers a 12-month period. Also, customers who settled their loan early, were not refunded the remainder of the single premium PPI cover that was no longer needed.
Single premium PPI on unsecured personal loans was banned by the FSA in October 2010. The reason for the ban is because the entire cost of the insurance has to be paid upfront, it leads to the borrower having to pay much more in initial repayments than they would otherwise pay.
Monthly Premium Car Finance PPI - these are also known as regular premium PPI that are paid for on a monthly basis.
There are significant differences between this and the single premium PPI:
- Monthly PPI policies can be cancelled at any time;
- Single premium PPI can only be cancelled in the first 30 days of the policy starting and be refunded fully;
- Cancelling a single premium PPI policy after 30 days, you will only get back a proportion of the premium paid.
With the above in mind monthly premium PPI seems to offer better value than single premium PPI on loans.
Ways in Which Car Finance PPI Was Mis-sold
PPI was such a profitable product for banks and financial services providers that customers were being sold it regardless of if PPI was needed, wanted, or suitable. In addition to this many people who had it didn’t know they had it, because it was added to their accounts without the customer’s consent or knowledge.
An investigation by the Citizens Advice Bureau and by the FSA uncovered the wider problem of selling PPI mis-selling. Proper checks had not been carried out to establish if the customer was eligible for PPI in the first place and if they understood if the product was right for them.
Furthermore customers were not given a choice of which type of PPI, if any, to take out. Many customers were sold single premium PPI policies instead of being offered monthly premium loan PPI policies.
There are several ways in which car finance PPI may have been mis-sold to you:
- You were unaware that you were being sold car finance PPI;
- You felt under pressure to take out the car finance PPI in order to be approved for the car finance;
- The lender did not check if any of the exclusions applied that would make it impossible to claim on car finance PPI policy;
- You were led to believe that the car finance PPI purchase was compulsory and not an optional extra at the point of sale;
- Your employment already provided you with this type of cover or you had another PPI policy in place;
- If your age at the time of taking out the car finance PPI was past retirement you would not qualify for the PPI;
- At the time of taking out the car finance PPI you were self-employed, unemployed or retired;
- Any pre-existing medical conditions you had were not considered at the time of taking out the car finance PPI;
- No information was provided to you about your right to cancel the car finance PPI policy.
Don’t Recall Which Car Finance Provider You Used?
Trying to remember the different car finance lenders used can be difficult, but it doesn’t mean you can’t still check for mis-sold PPI or put a claim in.
There are many cases where people cannot remember which providers they have used, mainly because of how long ago it was or the number of lenders they’ve used over time.
Looking for any paperwork relating to past car finance will help to identify lenders and determine if you had PPI or not. If you don’t have any documentation, we may be able to help in trying to identify your past lenders.
How Much Will I Get If My Car Finance PPI Claim Is Upheld?
If your car finance PPI claim is successful, the amount you are compensated by will consider the following:
- how much PPI you paid per month depending on if it was a single premium PPI policy or a monthly premium PPI policy;
- the amount of interest added;
- any charges for missed payments or arrears that could have affected the cost of the PPI.
When the above facts have been assessed and the amount to be refunded has been calculated, an additional sum for statutory interest at 8% should be added. This will make up the total amount payable for mis-sold PPI.
What is Undisclosed High Commission Claims on PPI (Plevin)?
The Financial Conduct Authority (FCA) in August 2017 introduced a new ruling for PPI mis-selling called ‘Plevin’. Under this ruling, anyone who had PPI from a bank or lender attached to an active finance product since 2008 may be owed some money. In the past, in order to reclaim any PPI, you had to have been mis-sold it. The FCA’s new rule says if over 50% of your PPI cost went as commission to the lender, and that wasn’t explained to you, you can claim back the extra above that.
Following the ruling, the FCA set out guidelines that defined high commission as being more than 50% of the cost of the PPI premium and further stated how banks should investigate and correct PPI commission.
The Plevin ruling will not apply to everyone for example if as a result of a previous claim, you’ve already received a PPI refund, you cannot now claim for unfair commission.
If you have already raised a previous complaint for mis-sold PPI which was not upheld, you may be able to claim about the commission charged on your PPI policy. You may be eligible if the any of the following apply:
- the car finance with the PPI was sold to you on or after 6 April 2007; or
- the car finance with the PPI was sold to you before 6 April 2007 and was still in effect on or after 6 April 2008.
How Long Do I Have To Make A Car Finance PPI Claim?
The FCA has set a deadline of 29 August 2019 by when all claims for mis-sold PPI need to be submitted.
This means that your mis-sold car finance PPI claim must be submitted before this date. New claims cannot be lodged after this date.
There may also be other time limits to considers, so act now and put in your car finance PPI complaint as soon as possible.
Can I Still Reclaim Car Finance PPI If the Company is No Longer Trading?
If the company who sold you the car finance PPI is no longer trading or has been declared in default you may still be able to claim from the Financial Services Compensation Scheme (FSCS).
Frequently Asked Questions Car Finance PPI Claims
Read our frequently asked PPI claims related questions and answers. In the majority of cases the first step to making a PPI claim is to get a PPI check done with the lender. Unfortunately the PPI deadline set by the FCA has now passed and we are no longer accepting any new PPI claims.
Other Organisations That Can Offer Help and Advice on Car Finance PPI
There are some regulatory bodies who can offer information and assistance regarding PPI: The Financial Conduct Authority, the Financial Ombudsman Service and the Financial Services Compensation Scheme.
Financial Conduct Authority (FCA)
The FCA are the finance industry regulator, whose role it is to protect consumers. They will provide general information about PPI but cannot offer advice on an individual basis, this includes mis-sold car finance PPI complaints.
You should contact the PPI provider directly, being a regulated company they should have procedures in place to deal with PPI complaints.
Financial Ombudsman Service (FOS)
The FOS deals with complaints and disputes made by customers of UK banks, building societies, insurance companies and other financial services organisations including advisers.
For the FOS to look into your car finance PPI complaint you will need to have contacted the organisation concerned and allowed them to put the matter right. If you’re not happy with the organisation’s response or lack or response, only then can the FOS get involved. However, you will need to contact the FOS within 6 months after receiving the final response from the organisation concerned for them to be able to investigate the matter.
Financial Services Compensation Scheme (FSCS)
The FSCS is there to protect customers in the event of an authorised financial services organisation fails i.e. firms that are authorised by the FCA and the Prudential Regulation Authority.
If the organisation you are dealing with has gone out of business, cannot pay the claims made against it or has been declared in default, the FSCS can make an award of compensation. The award will only be a maximum of 90% of the car finance PPI claim where there has been actual financial loss.