Question:

Is it permissible to reclaim PPI (Payment Protection Insurance)?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

The Answer:

It is permissible to reclaim mis-sold Payment Protection Insurance (PPI) up to the amount one has paid to the insurance company in the form of premiums. 

The Fiqh (jurisprudence of the Answer):

Conventional insurance contracts are irregular and voidable (fāsid) contracts.  The ruling of voidable contracts is that they must be nullified if possible[1].  Thus, besides mandatory conventional insurance contracts and permitted insurance contracts based on necessity, the remaining insurance contracts should be nullified. 
Reclaiming PPI will be a means of cancelling your contract[2].  One cannot take more than the amount paid as the excess will be a form of interest.  

And Allah Ta’ālā Alone Knows Best

Mufti Faraz Adam 
www.darulfiqh.com
 
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[1]  أَنَّ الْبَيْعَ الْفَاسِدَ وَاجِبُ الْفَسْخِ حَقًّا لِلشَّرْعِ رَفْعًا لِلْفَسَادِ (بدائع الصنائع ج 4 ص 102 دار الكتب)

فَصْلٌ فِي الْبَيْعِ الْفَاسِدِ)

أَيْ فِي بَيَانِ أَحْكَامِ الْبَيْعِ الْفَاسِدِ قَدَّمْنَا أَنَّ فِعْلَهُ مَعْصِيَةٌ فَعَلَيْهِ التَّوْبَةُ مِنْهَا بِفَسْخِهِ

(قَوْلُهُ وَلِكُلٍّ مِنْهُمَا فَسْخُهُ) أَيْ يَجُوزُ لِكُلٍّ مِنْ الْبَائِعِ وَالْمُشْتَرِي فِي الْبَيْعِ الْفَاسِدِ فَسْخُهُ رَفْعًا لِلْفَسَادِ، وَذَكَرَ الزَّيْلَعِيُّ أَنَّ اللَّامَ بِمَعْنَى عَلَى لِأَنَّ رَفْعَ الْفَسَادِ وَاجِبٌ، وَلَا حَاجَةَ إلَيْهِ لِأَنَّهُ حُكْمٌ آخَرُ، وَإِنَّمَا مُرَادُهُ بَيَانُ أَنَّ لِكُلٍّ مِنْهُمَا وِلَايَةَ الْفَسْخِ دَفْعًا لِتَوَهُّمِ أَنَّهُ إذَا مَلَكَ بِالْقَبْضِ لَزِمَ فَإِنْ كَانَ قَبْلَ الْقَبْضِ فَلِكُلٍّ ذَلِكَ بِعِلْمِ صَاحِبِهِ لَا بِرِضَاهُ، وَإِنْ كَانَ بَعْدَ الْقَبْضِ فَإِنْ كَانَ الْفَسَادُ فِي صُلْبِ الْعَقْدِ بِأَنْ كَانَ رَاجِعًا إلَى الْبَدَلَيْنِ الْمَبِيعِ، وَالثَّمَنِ كَبَيْعِ دِرْهَمٍ بِدِرْهَمَيْنِ، وَكَالْبَيْعِ بِالْخَمْرِ أَوْ الْخِنْزِيرِ فَكَذَلِكَ، وَإِنْ كَانَ بِشَرْطٍ زَائِدٍ كَالْبَيْعِ إلَى أَجَلٍ مَجْهُولٍ أَوْ بِشَرْطٍ فِيهِ نَفْعٌ لِأَحَدِهِمَا فَكَذَلِكَ عِنْدَهُمَا لِعَدَمِ اللُّزُومِ، وَعِنْدَ مُحَمَّدٍ لِمَنْ لَهُ مَنْفَعَةُ الشَّرْطِ، وَلَمْ يَشْتَرِطْ أَبُو يُوسُفَ عِلْمَ الْآخَرِ، وَاقْتَصَرَ فِي الْهِدَايَةِ عَلَى قَوْلِ مُحَمَّدٍ، وَلَمْ يَذْكُرْ خِلَافًا، (البحر الرائق ج 6 ص 102 أيج أيم سعيد)

[2] http://www.moneysavingexpert.com/reclaim/ppi-loan-insurance