Calculating PPI on Credit Cards

[Budgie]

Re: Calculating PPI on Credit Cards

Hi Maxedoutman,

Yep got the letters thank you.

Tesco have calculated the refunds basically in line with the methods that would normally be imposed upon them by the FOS for this type of PPI policy.

If you were to have pursued matters through the FOS ( as you did for your Lloyds claim ) then the level of redress offered by Tesco is the maximum that the FOS would consider you are due, with the exception of an additional amount to cover distress and inconvenience etc. We obviously do not want to argue the general matter of redress with the FOS !!. (well not at this point or in respect of your claim anyway )

In the case of your Tesco claim they have admitted the mis-selling of your PPI policy, FOS are not involved so it is up to you and Tesco to argue / agree the amount of redress.

So the question is as to whether the method Tesco have used is an acceptable measure of the redress that should be offered to you in respect of mis-sold PPI policy of this type.

What Tesco have offered you is as follows -

1) A refund of all the individual monthly ppi premiums that you paid.

2) An amount to reflect the estimate of the share of the monthly interest that you paid across to them in respect of those individual PPI monthly premiums. They have calculated this on a cumulative basis from the date of each individual monthly premium up until you cleared the total balance on the account ( and stopped paying them any interest ).

3) Compensatory interest (based on 8% simple interest per annum ) in respect of any periods where a recalculation of the outstanding balance on your account ( after taking out the PPI and estimated debited interest ) would have left the account in a positive ( credit situation. Now that didn't happen until you totally cleared the balance on the account so they have just offered to pay you the compensatory interest from that point onwards ( on what your credit balance would have actually been if you hadn't paid the PPI premiums and associated debited interest ).

4) They haven't offered you an additional amount for distress and inconvenience.

Bills spreadsheet calculates (1) and (2) above virtually exactly the same way as Tescos have done. However Bills spreadsheet calculates (3) the compensatory interest not just from when your account would have been in a credit situation but from the date of each individual ppi premium and amount of associated debit interest through to the present day. The difference ( as Bill suggests ) is about £230.

I shall pause here in case you have any questions. ( Plus I need to eat !!!!)

Next post will cover how I feel a court would deal with the matter of redress were they handling matters and my own personal opinions. Neither of which are particularly relevant because presently the matter is, as I have said above, to be settled between you and Tesco.

[Budgie]

Re: Calculating PPI on Credit Cards

OK,

Tesco have offered you a total settlement of £2730.18.

Bill has used his spreadsheet and suggested that their offer should be £2997.51

The difference being due to the way in which the compensatory interest has been calculated.

Tesco also haven't offered you an additional payment for distress etc. Bill quite rightly states that FOS have awarded figures of approx £500 in similar cases.

Now I could ramble on for hours and hours about the rights and wrongs of the FOS redress method in relation to compensatory interest. For example why have they decided that 8% simple per annum is a suitable figure. I know the reason and IMO the thinking behind it is flawed. This method of calculating compensatory interest bears no resemblance to the real world today and is an adaption of the method that the Courts use to award statutory interest. But I am not going to ramble on, well not on this thread anyway.

This compensatory interest is essentially to compensate you for the loss of the use of your money. With that in mind there is nothing really wrong with the method that Bill's spreadsheet uses to calculate this aspect of the redress. In fact the FOS do suggest a very similar method for certain special cases of missold credit card PPI and also for loan related PPI.

It's purely a question now of what you might consider to be an acceptable level of compensation.
Some people might just be happy to get their PPI premiums back.
Personally, I would be looking for them to pay me compensatory compound interest rather than simple interest.

The important thing to bear in mind is that to pursue a much higher figure of compensatory interest is probably going to mean that you would need to take this issue to County Court and to do that, with all the time and trouble and expense it would entail, isn't really worth it for a few hundred extra pounds.

If you are more or less happy with the settlement they have offered and instead of getting into a protracted argument with Tesco I would suggest the following approach.

An email to your Tesco contact along the following lines.

Thank you for your email bla ba, explaining the calculation method you have used in preparing your settlement proposal in respect of my mis-sold PPI claim.
I note that you have adopted a calculation method similar to that which the Financial Ombudsman might have imposed upon you had my claim been referred.
I also note that you have omitted to include an additional award in respect of distress and inconvenience caused to me by your actions in mis-selling this insurance as would normally have been suggested by the Financial Ombudsman.

Whilst I do not necessarily agree with your calculation method I am sure that you would like to bring this matter to a close.

I therefore wish to advise that I prepared to accept the figure you are proposing of £2730.18 provided you also add an additional 25% of this amount ( £682.55 ) as a goodwill gesture in respect of distress and inconvenience.

For the avoidance of doubt this would make the total settlement figure £3412.73.

Please signify your agreement by return email.

Payment should be made via BACS transfer and within 3 working days to the following bank account, insert details.


How do you feel about things Maxedoutman?

[MaxedOutMan]

Re: Calculating PPI on Credit Cards

Wow that is some info. Having read it approximately 23 times now, I understand what you are saying.

This may seem a silly question, but is asking for 25% reasonable?

My only concern would be can they withdraw the offer?

[Budgie]

Re: Calculating PPI on Credit Cards

Wow that is some info. Having read it approximately 23 times now, I understand what you are saying.

This may seem a silly question, but is asking for 25% reasonable?

My only concern would be can they withdraw the offer?

Only 23 times ???? LOL

You don't need to mention a percentage figure, just state the additional amount £400, £500, £600 £700 or whatever you require to settle.
I just went with 25% because I felt that was a reasonable amount to go for and roughly equivalent to using Bills spreadsheet figures plus a few hundred quid for distress and inconvenience.
It's really up to you to decide what you would be happy with and just go with a figure you feel comfortable with but remember it's Tesco and "Every little helps"!

I do not think there is any danger of them withdrawing their offer.

Bear in mind that by settling now they don't have to go through a FOS investigation, or a Court claim ( saving them time and money ).

[jax007]

Re: Calculating PPI on Credit Cards

but remember it's Tesco and "Every little helps"!

Oh ... very droll LOL!! x

[MaxedOutMan]

Re: Calculating PPI on Credit Cards

'Every Little Helps' - I was waiting for someone to say that........and it took 3 pages!

Is it worth mentioning about the compensatory interest and the £230ish extra in the email?

[Budgie]

Re: Calculating PPI on Credit Cards

'Every Little Helps' - I was waiting for someone to say that........and it took 3 pages!

Is it worth mentioning about the compensatory interest and the £230ish extra in the email?

Not really although I have sort of hinted at it anyway by suggesting that you write

"Whilst I do not necessarily agree with your calculation method....."

You could perhaps modify that sentence to read

"Whilst I do not necessarily agree with your calculation method, particularly in relation to the method you have used for calculating the compensatory interest, I am sure that you would like to bring this matter to a close."


and I was just waiting for the right opportunity for using "every little helps" LOL

[Bill-K]

Re: Calculating PPI on Credit Cards

Bill,

There is a side discussion that we need to have because I am pretty sure Tesco will argue that they have been 'generous' by calculating debited interest redress on the cumulative total of ppi premium refund. They could possibly argue that they only needed to add one months debited interest refund per ppi premium.

I suppose our argument back to them would be that it depends on the order of allocation of payments to the account and that normally older interest and charges would be settled before newer interest etc.
Thanks for the massive input here, Bud - and your kind comments on the spready. I briefly discussed this with Turbo before he handed me the baton, here. With PPI, we have been relying on the FOS 100% as the adjudication fallback. Unlike penalties, court action seems very rare. So, we have taken advantage of the FOS 'stance' that the lender has to prove their innocence - as opposed to the borrower having to prove the lender's guilt. Obviously, the basics have to be ascertained, in that the debt has to have existed, and the PPI has to have been sold.
Taking the FOS 'mantra' that the borrower must be put back into the position they would have been had the PPI not been sold, we have so far used the cumulative totalling of DI with no argument whatsoever, and the FOS seem to support this. The emergence of the 'appropriation' argument as you outlined is perhaps something we need to address. I'm not sure who Tesco's financiers are - but it is probably no coincidence thatr LTSB are putting forward the same argument here.

Whilst I can understand the desire to pay off the lower-interest-bearing portion of any balance first, I cannot see how the PPI debits can be similarly appropriated for the purpose of reclaiming. Sure - we can say that the portion of the account balance attracting the 0% promotional interest rate has to be paid off first (although I would argue that, separately) - but I can't see how this argument can apply to PPI. Interest charged at 1.5% on a balance of say £2,000 is charged on that balance EVERY month. If that balance SHOULD have been £1,000 - and decreasing every month - then THAT is all we should be concerning ourselves with. In effect, the 'going rate' of interest was applied to the £1,000 of that balance which would NOT have been owing if PPI had not been sold. Appropriation doesn't come into the equation, as far as I can see. And I don't think the FOS will argue with that, TBH
The usual FOS redress guidelines are pretty clear and I think we can firmly suggest that both apportioned debited interest refund and compensatory interest should be applied cumulatively to PPI premiums from date of the ppi premiums entry on the account to the date of settlement. With the apportioned debited interest refunds only ceasing to be accumulated when ( or if ) the account balance is reduced to zero ( ie when debited interest is charged ).
...And even THAT is something I disagree with. Why should the borrower lose out on compensation for loss of use of moneys UNNECESSARILY paid toward an unlawfully inflated balance ? Sure - no account interest was charged - but the borrower was deprived of the use of the moneys paid in to an account which WOULD have then been put in CREDIT had the PPI not been sold. Dammit - THIS is where the old Contractual Interest arguments rear their heads again. I feel we may concur here, as I also consider the FOS application of a paltry 8% SIMPLE interest as derogatory at best.

....

[Bill-K]

Re: Calculating PPI on Credit Cards

Oh...and putting it simply...I agree with Budgie's suggestions 100% here. Thanks Bud.

[cappo]

Re: Calculating PPI on Credit Cards

....

i have a tesco credit card bill and it,s being sorted out through rbs.

[Bill-K]

Re: Calculating PPI on Credit Cards

Thanks, Cappo - so it looks as though LTSB and RBS are both trying to calculate Compensatory interest in a way which doesn't seem to be supported by FOS. I guess they'll all be doing it soon.

[MaxedOutMan]

Re: Calculating PPI on Credit Cards

Tesco Credit Cards all come under Tesco Finance now after buying the 50% stake that RBS owned in 2008. Buyout and transfer was completed late 2010.

[Budgie]

Re: Calculating PPI on Credit Cards

Thanks, Cappo - so it looks as though LTSB and RBS are both trying to calculate Compensatory interest in a way which doesn't seem to be supported by FOS. I guess they'll all be doing it soon.

Sorry Bill, that's not quite correct.
Both LTSB and Tesco do actually appear to be calculating compensatory interest in exactly the same way that the FOS suggest, for a regular monthly ppi premium credit card case. I can't comment on RBS.

Maxedoutman's Tesco claim hasn't gone through the FOS. However Tesco are still trying to use the same redress calculation method that they would have been told to use by the FOS had this matter gone through them.

Have you decided what you are going to do Maxedoutman ??

[cappo]

Re: Calculating PPI on Credit Cards

Tesco Credit Cards all come under Tesco Finance now after buying the 50% stake that RBS owned in 2008. Buyout and transfer was completed late 2010.

my tesco clubcard is definitly being sorted through rbs max i,ve spoken to my cmc today and they tell me that rbs are dealing with it, i got it in 2008 paid it in 2009 and started claiming in 2011.

(email from my cmc today)




In regards to your cases I spoke with MBNA unfortunately this has fallen under the Judicial Review and is currently on hold along with both HSBC cases, there hasn’t been any further update on the review as of yet however we are hoping for an out come very soon. Barclaycard seem to have a back log on all of there cases as they are delaying responding back to us on your case and every other Barclaycard case I am currently dealing with. I have called them and faxed them for an urgent response, so hopefully I should have an update in the next few days, they have been responding however there responses have been delayed. I spoke with your lender Tesco on 7 March 2011 who advised they are awaiting information from RBS and will chase for a quicker response.

[MaxedOutMan]

Re: Calculating PPI on Credit Cards

Cappo, sorry wasn't disagreeing with you, just providing info on Tesco/RBS. Strangely, Tesco Finance are dealing with mine, although I didn't start the ball rolling until Dec 10. Well I say Tesco Finance, I can't see any mention of RBS on the letter, and they're based in Glasgow.

Budgie, I've spoken to Tesco asking for £2990ish plus redress for distress (nagging Mrs) and inconvenience (having to bury the said nagging Mrs). Now waiting on a response.