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.Read More