BILLIONS of pounds could be on the way back to customers in a revolt that will make the backlash over bank charges seem like a squabble over pocket-money.
Fourteen million people who have been mis-sold loan insurance are in line for refunds that are set to cost insurance companies as much as £3.85billion.
The scandal surrounds loan, credit card and mortgage agreements where people are tricked into buying overpriced insurance cover in case they miss a payment.
Two announcements from the Financial Services Association in the past month have given the green light for customers to seek refunds on these payment-protection insurance (PPI) policies.
But experts say up to 70 per cent of these are being mis-sold, and to make policyholders even more furious, only ONE in FOUR of these policies payout.
The insurance is meant to cover your payments if you can’t work due to accident sickness or redundancy, but policies do not cover the self-employed, students or housewives. Policyholders can also miss out if they are sacked and even certain suffer illnesses such as stress and even back pain.
For example, 30-year-old Matthew Turley, took out car loan for £4,700, but was charged an additional £5,612 for debt cover. Together with the interest, repayments would have totalled £14,537. He believes he has been duped and is demanding a refund.
"In most cases PPI will have come at a considerable extra cost so it’s definitely worth trying to reclaim lost funds. Even a relatively modest loan of £5,000 over two years would attract an extra £1,300 with the most expensive provider – that’s a 26% increase on the original loan value.
"Many just won’t have realised they’re paying PPI. As the cost is rolled up into the overall repayment schedule, many people will have thought it was part of the cost of the loan.
"PPI can be useful if you are concerned about your borrowing and want peace of mind, so if you’re looking to take out a loan, don’t forget that you can purchase PPI with any major insurance broker – it doesn’t have to be an expensive add-on with your loan provider.
2. Write to the company that sold you the policy, ask for the cost of the PPI plus any interest to be refunded. You may also be able to claim lost payouts if you were turned down on a policy you should never have been sold.
3. The firm must reply in eight weeks and if you do not hear from them, or you are unsatisfied with the response, take your case to the Financial Ombudsman (financial-ombudsman.org.uk) or the small claims court.
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