PPI compensation has resulted in the banks paying billions of pounds to consumers. Do you know how your refund is calculated?
The PPI claims deadline is set for 29th August 2019. The date is set by the Financial Conduct Authority (FCA) and aims to encourage those who have not yet claimed to do so.
Unsure about what PPI is? PPI is a type of insurance that covers your repayments to the bank in the case that you are unable to pay a loan, credit card or another form of debt. The insurance wasn’t necessarily bad, but it was widely mis-sold to customers who didn’t need it or ask for it. As such, millions of people have been claiming compensation from their banks — but not for much longer.
If you intend to make — or are currently making — a claim, you might be curious to know how much you’ll get back and how your PPI refund is calculated. Unfortunately, you won’t know the exact amount of money you’ll receive from a refund until the claim is settled at the bank.
However, using a technical algorithm, we have created a PPI claims calculator, which can offer you an approximation as to how much you could receive from the bank. Below, we break down how PPI compensation is calculated.
PPI Compensation Process
The bank has eight weeks to respond to a PPI claim once it has been received. What is the bank doing in that time? First, the bank needs to identify if the insurance was mis-sold. Next, it will need to calculate how much you are due. The refund amount can be complex as it involves three fees. Some are more technical to calculate than others. Here is a breakdown of PPI compensation:
PPI policy amount — The bulk of the repayment will be the amount you paid for the PPI policy. This will have been paid either upfront or in monthly payments. For example, you might have taken out a loan of £10,000 and the PPI policy was £2,500, creating a total of £12,500.
Interest paid on the policy — When purchasing your PPI policy, you will have paid interest on it. If the loan had an interest rate of 7.5% AER, the PPI policy will have had the same. This means the compensation will be calculated at 7.5% per annum of the £2,500 policy.
Statutory interest — Statutory interest acts as compensation for you having been deprived of money that is rightfully yours. The statutory interest is currently charged at 8% per annum. This means that 8% interest will be added to your refund for each year you were deprived of your money. However, it’s important to note that before April 1992, statutory interest was 12%. This means if any of your PPI policies were mis-sold before this date, you will receive a greater sum of money from your PPI claim.
These are the three elements involved in calculating a PPI claim. Naturally, the calculations can take a while, particularly on old policies when the statutory interest was 12%.
It’s important to note that each PPI policy amount will vary depending on if it was a mortgage, credit card or loan. Interest rates will also differ per policy, meaning no PPI compensation is the same.
How Do You Know if Your PPI Compensation is Accurate?
If your claim is successful and you want to know if your refund is accurate, you can do some quick calculations based on the rate of interest to determine whether it’s in the region of what you are entitled to.
Canary Claims operates a no-win, no-fee policy and charges a low fee of 15% + VAT (18% total) on successful claims. You could be due PPI compensation. Contact us today to start your claim.