PPI interest payments - or did I dream this?

[DoTheyMeanMe]

Received a PPI payout a few weeks ago, on a credit card that has been terminated and defaulted. The payout was a little less than the card balance so it was all credited to the outstanding balance on the card.

I seem to have an idea in my head that the 8% statutory interest part of the award should not have been used to reduce the card balance but should have been paid directly to me.

Or, as I said above, did I dream it?

Someone please put me right.

[IF]

Re: PPI interest payments - or did I dream this?

Bumping your post DTMM

[DoTheyMeanMe]

Re: PPI interest payments - or did I dream this?

Bumping your post DTMM

Thank you.

[di30]

Re: PPI interest payments - or did I dream this?

Hiya

Thanks IF for letting me know lol, just signed back in now.......

DoTheyMeanMe

I was also under the impression that the interest should be refunded to the customer, I know in my hubby's case this did happen (lloyds), but not saying that it should differ from one bank to the other)_ but what bank is this with please?

I would think about emailing/writng to the Chief Executive Officer (CEO) and get on to him or her about this, meanwhile I will ask for an opinion and double check on this again but I do feel the interest side of the refund should have been awarded to you....

[DoTheyMeanMe]

Re: PPI interest payments - or did I dream this?

Thanks Di. That is my thinking but I cannot remember where I read it so any infomation or a pointer would help.
DTMM

[di30]

Re: PPI interest payments - or did I dream this?

I will see what can I find asap.......and your welcome x

[di30]

Re: PPI interest payments - or did I dream this?

redress for mis-sold PPI on credit cards

Where a PPI policy is sold alongside a credit card, the premium is added to the credit card balance each month and interest is payable on it.
our approach

Where a consumer was mis-sold PPI alongside a credit card, and the policy remains in force, we will tell the business to cancel it. The approach we tell the business to take to compensate the consumer fairly will depend on the consumer's circumstances and the current position of the credit card, but compensation will usually involve two steps:
• A hypothetical reconstruction of the credit card account to find out what the current balance of the credit card account would be if the consumer had paid the same monthly payments, but the PPI policy had not been added to it.
This will involve the business removing the PPI premiums, any interest that was charged on the premiums and any charges (and interest on those charges) that would not have applied if the PPI had not been added to the account.
The business should then pay the consumer the difference between the current balance and what the current balance would have been without PPI.
• The addition of interest (usually at our normal rate of 8% per year simple) on any credit balance for any periods when the reconstructed account would have been in credit.
In some cases we may decide to tell the business to pay compensation for any distress or inconvenience caused to the consumer.
other approaches taken by businesses

Some businesses take a different approach, or at least present their calculations differently to consumers. Some businesses present their redress calculations as:
• a refund of the PPI premiums plus interest at the credit card rate; and
• interest at 8% per year simple (without identifying what they are adding this interest to).
An offer set out like this could indicate that the business has calculated compensation using a different approach to the one we would usually expect. But it could be that the business has carried out a full hypothetical reconstruction of the account and simply presented its results in a different way. In our experience, setting an offer out like that is likely to be confusing for the consumer.
communicating how compensation has been calculated

Calculating compensation for a PPI policy mis-sold alongside a credit card can be complicated. A consumer's spending on their credit card – as well as their payments and the cost of PPI – might be different each month. So the calculation can involve many variables, possibly over a long period of time.
It is helpful if a business explains clearly to the consumer how it has carried out its calculation.
Based on examples of good practice we have seen, the examples below show how a business might set out how it has calculated compensation for a mis-sold regular-premium PPI policy added to a consumer's credit card in three common scenarios:
• where the credit card and PPI policy are still in place;
• where the credit card and PPI policy have been cancelled; and
• where the credit card account is still in place, but the PPI policy has been cancelled.
See above for guidance on what we expect businesses to set out when they add interest to compensate the consumer for the loss of use of their money.

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what we know

• you took out your credit card in June 2007 and took out the PPI policy at the same time; and
• your credit card balance today is £2,743.28.

what we have assumed

• credit card interest at the rate charged on normal purchases applied to the PPI premiums added to your account; and
• you would have paid the same payments to your account each month as you actually paid.

If you do not think that these assumptions should be used in your circumstances, please let us know why not.
what we have calculated

• if you had instead taken out your credit card without the PPI policy, your credit card balance today would be £1,976.88. We know this because we’ve looked at your credit card account from the day it started until now and worked out what the balance would have been without the cost of PPI and any interest and charges you paid as a result of PPI being included on your account; and
• there were some periods when, without PPI, your account would have been in credit.

what we will do

• We will cancel the policy for you and will pay you the difference between your credit card balance today (£2,743.28) and what your credit card balance would have been without the PPI policy (£1,976.88), which is £766.40.
• For the periods where your account would have been in credit had you not had the PPI policy, we will pay you 8% per year simple interest on the amount you would have been in credit for the period you would have been in credit. In your case, this will be £97.35.
• In total we will therefore pay you £863.75 compensation (£766.40 plus £97.35).

what this means for you

• Going forward you will no longer have a PPI policy added to your credit card account so you will not be covered should you need to make a claim.

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where the credit card and PPI policy have been cancelled

what we know

• you took out your credit card in May 2003 and took out the PPI policy at the same time; and
• just before you closed your account, your credit card balance was £9,673.41.

what we have assumed

• credit card interest at the rate charged on normal purchases applied to the PPI premiums added to your account; and
• you would have paid the same payments to your account each month as you actually paid.

If you do not think that these assumptions should be used in your circumstances, please let us know why not.
what we have calculated

• if you had taken out your credit card without the PPI policy, your credit card balance just before you closed your account would have been £5,981.27. We know this because we’ve looked at your credit card account from the day it started until the day it closed and worked out what the balance would have been without the cost of PPI and any interest and charges you paid as a result of PPI being included on your account; and
• there were some periods when, without PPI, your account would have been in credit.

what we will do

• We will pay you the difference between what your credit card balance was just before you closed your account (£9,673.41) and what it would have been without the PPI policy just before you closed your account (£5,981.27), which is £3,692.14.
• Because you haven’t had that money since you closed your account, we’ll add interest to that amount at 8% per year simple from the date you closed your account up to now to compensate you for the loss of use of that money, which is a further £738.55.
• For the periods where your account would have been in credit had you not had the PPI policy, we will pay you 8% per year simple interest on the amount you would have been in credit for the period you would have been in credit. In your case, this will be £157.38.
• In total we will therefore pay you £4,588.07 compensation (£3,692.14 plus £738.55 plus £157.38).
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where the credit card is still in place, but the PPI policy has been cancelled

what we know

• you took out your credit card in October 2006 and took out the PPI policy at the same time;
• you cancelled the PPI policy in August 2010; and
• your credit card balance today is £1,965.32.

what we have assumed

• credit card interest at the rate charged on normal purchases applied to the PPI premiums added to your account; and
• you would have paid the same payments to your account each month as you actually paid.

If you do not think that these assumptions should be used in your circumstances, please let us know why not.
what we have calculated

• if you had instead taken out your credit card without the PPI policy, your credit card balance today would be £1,023.49. We know this because we’ve looked at your credit card account from the day it started until now and worked out what the balance would have been without the cost of PPI and any interest and charges you paid as a result of PPI being included on your account until August 2010; and
• there were some periods when, without PPI, your account would have been in credit.

what we will do

• We will pay you the difference between your credit card balance today (£1,965.32) and what your credit card balance would have been without the PPI policy (£1,023.49), which is £941.83.
• For the periods where your account would have been in credit had you not had the PPI policy, we will pay you 8% per year simple interest on the amount you would have been in credit for the period you would have been in credit. In your case, this will be £55.18.
• In total we will therefore pay you £997.01 compensation (£941.83 plus £55.18).
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Most businesses pay redress for mis-sold PPI alongside a credit card directly to the consumer, which we think is fair. Occasionally, some businesses reduce the consumer’s credit card balance instead. This might also be fair, but if a consumer says they would prefer the redress to be paid directly to them, we will consider the circumstances carefully.

As on the FOS website today....
http://www.financial-ombudsman.org.u...html#redresscc

[Never-In-Doubt]

Re: PPI interest payments - or did I dream this?

Now another thing. Who owns the debt? If it's been assigned they CANNOT apply it to the debt as the assignee doesn't have a legal right to money owed to you by a third party (the bank).

If however the actual lender is the creditor (ie still owned by the OC) you can ignore the above.

[DoTheyMeanMe]

Re: PPI interest payments - or did I dream this?

Now another thing. Who owns the debt? If it's been assigned they CANNOT apply it to the debt as the assignee doesn't have a legal right to money owed to you by a third party (the bank).

If however the actual lender is the creditor (ie still owned by the OC) you can ignore the above.

The account is still with the original creditor, unfortunately.

[DoTheyMeanMe]

Re: PPI interest payments - or did I dream this?

Thanks for that Di, you are a star.

So, (as I can't claim special circumstances) it is left pretty well to the discretion of the banks - and we know what they will do with it.

I have obviously been suffering from wishful thinking again.

Thanks again,
DTMM

[ken100464]

Re: PPI interest payments - or did I dream this?

Is not the 8% due to you because its taxable?

How can the taxman take his cut if you never had it? Because am sure some of the barstewards are busy removing tax from this element before it even gets handed over now.

Think along the lines that this is income like a savings account because they had their dirty mites on your money and deprived you of it.

So I was under the impression they could keep the PPI and associated interest but the 8% came to you either minus tax at source or you had to declare it.

Bill K might know bit more about this

[DoTheyMeanMe]

Re: PPI interest payments - or did I dream this?

Is not the 8% due to you because its taxable?

How can the taxman take his cut if you never had it? Because am sure some of the barstewards are busy removing tax from this element before it even gets handed over now.

Think along the lines that this is income like a savings account because they had their dirty mites on your money and deprived you of it.

So I was under the impression they could keep the PPI and associated interest but the 8% came to you either minus tax at source or you had to declare it.

Bill K might know bit more about this

Yes Ken, that was my thinking.
I can accept the tax liability on the 8% but surely it is my money as it is interest upon money I (inadvertently) loaned them. I would like to think it should come to me rather than be set against a debt, but there seems to be no precedent on this.

DTMM

[pompeyfaith]

Re: PPI interest payments - or did I dream this?

They can only keep the PPI if the account is behind if it is up to date and you have kept to the contractual agreement it must all be returned to you as it was after all missold so the only way to put the missell right is to redress.

If the account is behind I would be asking myself did this PPI put me behind with my payments or rather had I not had the PPI would my account be up to date.

[ken100464]

Re: PPI interest payments - or did I dream this?

Perhaps SXGuy could help on this one as Tax is his thang.

PF I think DTMM is on about the 8% stat interest. (The interest they are supposed to pay for having your money if the card went into credit at any point during their recalculation of what the balance should have been if the account went into credit) The bit we are all supposed to pay tax on. PPI and associated interest can be offset if you still have a balance outstanding. But how can you pay tax on this 8% if you dont even get it? That seems another scandal if the banks are whipping this aswell. Thats not just doing the consumer again that is actually doing the taxpayer aswell. But of course with our banks nothing surprises

DTMM I would think Bill K, SXGuy or Turbo could be worth a PM?

[SXGuy]

Re: PPI interest payments - or did I dream this?

tricky one isn't it.

It is correct, that any interest you receive from PPI is taxable. However some creditors usually pay you out, less the 20% tax.

If a creditor pays you out in full, then technically, you would need to complete a self assessment and declare it, so you can pay the tax that's due.

Think of it, like a savings account which pays gross interest. You would need to declare it, to pay the tax due, if the bank pays you net, you don't need to do anything.

The fact here is, they have decided to keep it. Im not entirely sure whether they can or can not do this. But from a tax point of view, it was never received by you, therefore it didn't become "your" liability.

First, we need to establish whether the 8% interest was due to be repaid to you or not, and then go from there. But I have a sneaky feeling that even if they agree, they would repay you less the tax anyway, in which case, you would still have no worries about declarations.

It would be interesting to find out however, whether they reduced the balance after they added the 8% to pay the tax due on it. As I would think, this should be done as a matter of law. What I mean is, if you were as an example awarded £100 as 8% interest, they would only be allowed to allocate £80 of it, towards your balance.

Did they allocate the whole lot?