PPI News

BBC Exposes Credit Card PPI Redress “Lottery”

July 20, 2015

The BBC´s Moneybox program has exposed how consumers seeking credit card PPI redress receive different amounts depending on the issuer of their credit card.

Listeners to Radio 4´s Moneybox program heard that credit card PPI redress “is becoming a bit of a lottery” due to two different methodologies used to calculate PPI refunds when credit card consumers pay off their monthly credit card balances.

Both methodologies are supposed to return the credit card holders to the financial position that they would have been had PPI not been missold to them. However, the way in which certain credit card companies calculate credit card PPI redress mean that their customers receive a lower amount of PPI compensation than if their credit card had been issued by a High Street bank.

Explaining the difference between the two methodologies, personal finance expert Jonquil Lowe said that when refunds of PPI are calculated, a consumer´s credit card history is reconstructed. Premiums for missold PPI are removed, as are any fees and charges that have been triggered by the premiums. Any interest charged on the premiums, fees and charges is refunded and 8% is added to the total as statutory interest.

When the premiums, fees and charges are removed, the outstanding balances due to be paid by the credit card holders are lower. Consequently, when consumers have paid off their credit card balances in full, they have effectively overpaid the credit card company. In this scenario, High Street banks treat the overpayment as a temporary credit to be used against future spending and, when they calculate credit card PPI redress, they include the overpayments in their payments of PPI compensation.

However, when selected credit card companies calculate their customers´ PPI refunds, the overpayment on the account is treated as a permanent loan therefore not included in credit card PPI redress payments – this reducing the value of the refund and creating the scenario in which two credit card customers have paid the same amount in premiums and charges after being missold PPI, but the bank credit card customer receives significantly more credit card PPI redress.

The two companies specifically identified as using the latter methodology to calculate credit card PPI redress were MBNA and Capitol One. However, there could be several other credit card companies also using this method for calculating credit card PPI redress. Therefore, if you have received a refund of PPI compensation from a credit card company, and would like to ensure that it has been calculated correctly, please call our claims helpline and speak with one of our claims specialists.

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Ombudsman Receiving More Complex PPI Complaints

February 26, 2015

The Financial Services Ombudsman has reported that it is receiving a higher number of complex PPI complaints and appeals against banks´ decisions.

The announcement of the increasing number of complex PPI complaints was released in the Ombudsman´s second half report for 2014. The independent arbitrator of financial disputes revealed in the report that the total number of PPI-related complaints and appeals fell from 133,000 in the first six months of the year to just under 105,000 between July and December.

PPI ClaimsHowever, PPI-related complaints and appeals still account for nearly two-thirds of the Ombudsman´s workload and there has been a changing trend in the nature of issues customers are asking the service to resolve, which – according to Chief Ombudsman Caroline Wayman – “are becoming increasingly hard-fought and more complex”.

Despite the increase in complex PPI complaints, the Ombudsman is achieving significant results in investigating claims and appeals on behalf of customers. 82% of PPI complaints made against certain units of the Lloyds Banking Group were upheld in the second half of 2014, and 68% of the PPI complaints made against Barclays Bank PLC.

Other credit providers against which the Financial Services Ombudsman achieved significant uphold percentages included the HFC Bank (part of the HSBC Group – 83%), Citibank (74%) and Capital One Credit (60%).

Unsurprisingly, the Lloyds Banking Group and Barclays Bank PLC were identified in the Ombudsman´s half-yearly report as Britain´s most complained about financial institution. According to data available on the Financial Services Ombudsman´s website, more than 36,000 of the PPI complaints received between the second half of the year (from a total of 105,000) were made against the Lloyds Banking Group, while 15,877 complaints were made about the service provided by Barclays Bank PLC.

Other financial institutions that were recorded as failing to satisfy their customers´ expectations of service included the HSBC Group (9,740 complaints), the RBS Group (6,914 complaints), Capital One (6,289 complaints) and the Santander Group (3,917 complaints).

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BBC: Incorrect Calculation of PPI Compensation Common

June 15, 2014

BBC researchers have found that the incorrect calculation of PPI compensation is a common practice among banks and credit providers.

The researchers for the BBC radio program “You and Yours” found that banks and credit providers are frequently neglecting to include overdraft charges that were triggered by a PPI premium taking customers beyond their borrowing limits. The researchers allege that the incorrect calculation of PPI compensation is deliberate and is saving banks millions of pounds at their customer´s expense.

The researchers supported their allegations with evidence of miscalculated PPI refunds paid to customers of Lloyds, Barclays, MBNA and Capital One. All four of the credit providers investigated were guilty of the incorrect calculation of PPI compensation. The radio program also included an example of a miscalculation in which an MBNA customer had received a PPI refund of £5,800, but when his charges and compound interest were also included, should have received a refund in excess of £13,000.

Several other examples were included in the broadcast where an incorrect calculation of PPI compensation had been the basis of a PPI refund. Leading financial claims expert, Cliff D´Arcy, estimated that the total amount saved by banks and other credit providers approached £1 billion. He said that his high estimate was justified on the grounds that the fees charged for exceeding a borrowing limit are excessive, and that the practice of miscalculating PPI compensation appears to be so widespread.

Caroline Wayman – the Principle Financial Services Ombudsman – commented on the findings of the BBC´s researchers and said that, under the rules for calculating PPI compensation, “If a fee is the result of the mis-sold PPI, it should be given back, and if it’s not included in the amount [of the compensation], that would be a mistake.” She added “Any widespread failure to carry out proper calculations would most definitely be disappointing”.

The credit providers accused of the incorrect calculation of PPI compensation declined to be represented on the BBC´s broadcast; however the Lloyds Banking Group submitted a statement which was read out on the program. It said “When a customer lets us know that they may have incurred other costs because of their PPI policy, we will investigate and make an appropriate refund.”

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