How to claim for mis-sold insurance

Last week, something rather unusual happened: a collection of high-street banks was defeated in the High Court. Last year, the Financial Services Authority (FSA) ruled that the banks should pay compensation to the millions of customers to whom they had mis-sold payment protection insurance (PPI) schemes since 2005, the point at which the FSA started regulating sales of the product. They contested it and they lost. This means that PPI holders who can show they didn't need or want the insurance, but were sold it anyway, are eligible for a share of the £4.5bn compensation now on offer.

The idea of PPI was that it would cover the debt repayments on personal loans if sickness or misfortune stopped borrowers from working. Yet a lot of banks sold it to people who were not eligible customers whose existing medical conditions meant they couldn't ever get a payout, or the self-employed who weren't eligible for it in the first place, for example. Other customers claim that banks added PPI on to credit cards without explaining that it was voluntary, or even telling them it had been done.

So how do you go about claiming? Firstly, even if you think this has nothing to do with you, do check. If you took out a loan or a credit card since 2005, it's possible a scheme was tacked on without your knowledge one which you've been paying for ever since. The banks look likely to appeal against the ruling in a bid to delay repayments and, true to form, many Santander being a notable exception have stopped processing PPI complaints while they decide whether to appeal. But this won't delay things for long they have only been given 21 days to do so so you might as well start your complaint process straight away.

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Contact the firm that sold you the PPI, explaining why you think you were mis-sold one and what you will accept in compensation. Add in copies of any original documents. Then wait. Your bank has eight weeks to respond. Should you have heard nothing by then, contact the Financial Ombudsman Service (0800-023 4567) and give them the same evidence. You should be in with a reasonable chance of success. So far the ombudsman, which has received more than 200,000 complaints, has sided with consumers in more than 75% of cases. And the amounts aren't small: the average payout for a mis-sold PPI policy is £2,750, but the highest so far has been £44,000.

However, do make sure you don't get hoodwinked again. The cash on offer has, inevitably, tempted 'no win, no fee' firms into the market. But if you use one of them, you won't get a penny more than you would have and, worse, they'll pocket around a quarter of anything you win.