CONSUMERS are being urged to claim thousands of pounds in compensation for mis-sold payment protection insurance (PPI), in what could be a bigger revolt than bank charges.

Millions of people could be eligible because they were mis-sold PPI, which is supposed to cover your mortgage, credit card or loan repayments if you are unable to work because of accident, sickness or redundancy.

There are about 20m PPI policies in Britain with revenues of £5 billion a year, and Martin Lewis at Moneysavingexpert, a consumer website, believes up to 50% have been mis-sold. Some industry analysts think that figure could be even higher. One insider, who wishes to remain anonymous, estimates as many as 70% were mis-sold.

If all of those with such policies sought reclaims, it could cost providers a fortune and dwarf the £1 billion that has been paid out in bank charges.

An estimated 1.4m people have reclaimed overdraft fees from banks and building societies, and hundreds of thousands more claims are currently on hold while the industry awaits the outcome of a test case between the Office of Fair Trading and eight current-account providers.

The revolt against PPI has not yet begun – largely because many are not even aware they have the insurance. PPI is riddled with exclusions and, in the past, has often been added to loans or credit-card agreements without the customer knowing.

Lewis said: “It really is a scandal. Some have this insurance without realising it or were told it was compulsory when it wasn’t. Others are paying for it when it doesn’t actually cover them and most don’t realise the true cost, which can be thousands.”

For example, someone borrowing £10,000 over five years from Moneybackbank, part of Alliance & Leicester, would pay £3,200 in PPI premiums, according to Moneysavingexpert.

PPI is often sold when people sign up for store cards, or buy electrical goods and opt for the retailer’s finance package, yet the small print is sometimes not fully explained.

Most policies do not pay out for the first 30 days, and conditions such as stress and back pain tend not to be included. The self-employed, students and housewives are also not usually covered.

Yet the first time many policy-holders find out about these exclusions is when they have a claim rejected.

Consumer groups are urging people to check whether or not they have PPI cover. If they have and believe it was mis-sold they should ask for a refund.

Teresa Fritz at Which?, the consumer lobbyist, said: “When the insurance was sold, the adviser should have explained it and investigated whether it was suitable for you.

“In most cases this hasn’t happened, so anyone who has PPI and doesn’t think it is right for them should complain to the company that sold it.”

Lewis agrees wholeheartedly: “It’s time for the millions who are unaware of how poor their cover really is to see if they were mis-sold and demand their money back.”

If you were sold a policy that you later discovered was unsuitable, you can claim for mis-sell-ing. You can also claim if you were never told about the cover or it was not explained fully.

Even if you were refused a pay-out in the past because your policy had a “nil refund” clause, you may be able to get compensation now – if you should never have been sold it in the first place.

You can download template letters from Moneysavingexpert. Complain to your PPI provider initially and ask for the cost of the PPI, plus any interest, to be refunded. It must reply within eight weeks. If you hear nothing, or are not satisfied with the response, go to the ombudsman (financial-ombudsman.org.uk).

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