FOS and PPI

[Paul210]

Re: FOS and PPI

Hi---I am preparing my thoughts for a forthcoming claim and have been doing much reading on possible arguments if I go to court.

The new accepted FSA/FOS statement is "The claimant must be put back in the position as if he/she had never had PPI in the first place"

So my reading is simply that one calculates the effect of adding PPI (which I can do with assistance from Bill) --- so I therefore conclude that it is no longer required to use precedents like Sempra (which must be fully understood in case of cross-examination) or the complex arguments re "restitution."

Am I over simplifying the situation?

Turbs

Putting the client into the position they would have been in is clearly defined by FOS and the interest on premiums is the same as applied to the account, usually compound in the case of a card, that much I'd agree with.

I wouldnt have thought however that you could use the same argument or FOS viewpoint to argue the 8% compensatory interest should be compound, FOS doesnt clearly state one way or the other but given this is based on the fact that you could claim interest should you go via court rather than fos and is based on the figure stated in the s.69 of the county courts act 1984 ("CCA84") I would have thought the same reasoning would be applied.

Under CCA84 this is simple interest and as such I think that FOS clearly intended it to be simple also. The school of thought that the sempra case entitles to compound for compensatory interest is in my oppinion a tough one to take to court and I think any lawyer acting for a bank would put up a fierce fight to argue that compensatory interest should always be simple in accordance with the CCA84. It needs to be remembered that the restitution is the putting back in the position and any relevant interst charges to the account is covered under this, the 8% is purely compensatory and as such Im not convinced sempra would apply.

I'm not saying no-one will ever win an argument using sempra as precedent as stranger decisions have been made by courts in the past however I certainly wouldn't bet any money on it.

[Turboman]

Re: FOS and PPI

Hi Paul

Thanks for your reply

I perhaps didn't make myself clear-(I don't get let out of Bill's Sums Dungeon much these days)--I was not talking re advocating 8% compound-but posing the argument that one need no longer have to quote Sempra or restitution arguments for ordinary compound interest at the contractual rate applcable on the day as one can rely solely NOW on "The claimant should be put back in the position as if PPI had never been included"

ie----if I go to court---I would just use Mathematics and not previous case law

Would that be wise?

[Paul210]

Re: FOS and PPI

Hi Paul

Thanks for your reply

I perhaps didn't make myself clear-(I don't get let out of Bill's Sums Dungeon much these days)--I was not talking re advocating 8% compound-but posing the argument that one need no longer have to quote Sempra or restitution arguments for ordinary compound interest at the contractual rate applcable on the day as one can rely solely NOW on "The claimant should be put back in the position as if PPI had never been included"

ie----if I go to court---I would just use Mathematics and not previous case law

Would that be wise?

aahhh, I see (I think), yes, where the lender charges compound interest on premiums then I certainly think you could rely solely on the "put back in position" argument for the refund of such interest as thats what was implied on acceptance form by the lender when they state "put back in position".

These days most of the offers relating to cards that I see already take the compound interest charged on premiums into account although if the lender doesnt provide a complete breakdown of how they calculate then it can be a bit of a minefield (unless of course you have every statement for the card and the order in which they apply payments made by you from the original and any varied terms of the credit agreement) then you can restructure the account yourself. Where the account would have gone into a credit balance as a result of the restructure you need to be especially careful as no interest on anything previous can be allocated from that point, its not as simple as just working out the date of the premium and applying compound interest until the date of the offer and I dont think using a preprepared spreadsheet would take all the factors into account, I think it would need to be a bespoke calculation for each card. I know you and bill have some very clever sheets you use to work these out, If you want to send a copy over PM me for my email address and I'll have a look and see if theres anything you dont already take into account.

If you go to court arguing compound interest and your figures are wrong you may not only lose all credibility and therefore the case but also the lenders legal team would jump on that as an argument to try for a costs order...make sure beyond any possible doubt that your figures are 100% correct before you issue proceedings.

[Bill-K]

Re: FOS and PPI

Excellent opinion from Paul, if I may say so - thank you indeed, sir !!!
As I think we all agree and understand, the account interest which is apportioned to the accumulated total of PPI premiums paid so far will have been charged to the account at whatever the rate was during each month. This is what we have usually termed 'Debited Interest.' As Paul says, it is almost invariably charged at the 'Contractual Rate,' and calculated as compound interest. It is important to understand that - once that calculation has been done, and the interest charged - it is a fixed amount. Any subsequent rate changes will NOT affect the amount deducted in any month. The only calculation we need to do for DI is that of apportionment - for which we simply need to know the cumulative PPI totals, and the monthly account balances (preferably averaged over the month, if possible). We don't actually need the historical interest rates.

As Paul says, we get complications where the account is settled, or a large part of the balance is paid off. This is because the accumulated PPI may then become more than 100% of the subsequent monthly balances. In such cases, I believe the fairest way to deal with it is to apply a 100% "cap" to the apportionment ratio. This has the effect of reclaiming 100% of the account interest in these months - and no more (which would be realistic and fair, IMO). This can happen over time, anyway, so it needs to be a part of the continuing calculations.

Now, both the above (the PPI and the apportioned account interest charged on it - the DI) are fixed amounts, in that they do not increase on a daily basis in the same way that our 8% Statutory Interest does. Of course, if the account is still running, then as each month passes, further PPI and/or further apportioned DI is added. But again - once added - each of these is a fixed amount, and does not increase any further as time passes.

The way I always prefer to think of these items is that we are RE-claiming them - as opposed to claiming them - because they are sums of money we have been charged by the lender.

Finally, we have the question of 'Compensatory Interest,' as I prefer to think of it. This is the interest which we CLAIM from the lender as compensation for the loss of use of the above money. It has NOT been charged to US at any time, and will therefore not be seen in any of the account records. This is compensation which we are now CLAIMING. This is the compensatory interest which often seems to cause confusion, because it has been set 'traditionally' at the Statutory Rate of 8% simple interest, but which in fact may be claimed at another rate. ONE such rate argued for has been the 'Contractual' rate - which is the rate at which interest was charged to us by the lender, and this rate is usually higher - and calculated as compound interest. Other rates may well be claimed - but in each case, they will usually need to be backed by a pretty invincible argument.

Sure, for a while, the Contractual rate (which was heavily promoted by CAG's BankFodder - credit where due) was being successfully claimed - but the banks eventually found enough rebuttal to scupper this idea. Sure - Sempra was a good 'riposte,' but still not a copper-bottomed vessel. Titanic was unsinkable - remember. Sempra still needs a good crew - because it is a big ship, but with a tiny rudder. There are still icebergs out there - and there always will be.

If our PPI claim is rejected by the lender - or argued - then we have the FOS as one option, and the courts as another (this list is NOT exhaustive - we may wish to try the 'Molotov Manouvre,' for instance - but I cannot support this, as the price of fuel now precludes this approach). So let's just weigh up 'twixt the two main players.

If we use the FOS, we currently have delays and a very limp-wristed approach, it seems. We also will get NO support for claiming compensatory interest at anything other than the 8% Statutory rate. The big plus for most peeps is that the FOS does not involve court appearances which fill so many people with dread, and does not involve the risk of costs - or wasted costs - being awarded against the claimant.

If we use the Courts, we may have lesser delays and a more robust approach. We may be able to argue for a higher rate of Compensatory Interest - and the Court is bound to listen to our argument(s). But they better be good, as Paul says. True - we can claim 'In the alternative' - but we still need to understand our claim. The LIP is still expected to have done a lot more than just chatted to another geezer on the Clapham Omnibus !!! I'm NFG at caselaw, but I suspect that - if the FSA and FOS are adhering to the Statutory 8% rate, then we will have to be pretty convincing with our argument, methinks.

A further effing complication is the newer FOS Guidelines regarding credit card PPI. Originally, we were able to claim our 8% SI on each and every debit of PPI (and apportioned interest) made to our account. But not no more, no way, José !!! We can NOW only claim our 'Compensatory Interest' if the 'adjusted' (or 'notional' as I believe Barclays have termed it) account balance in any month becomes a credit balance. And even then, only on the amount by which the balance would have been in credit by if the PPI were not sold. SO - if we go the FOS route, then we have THIS limitation.

If we go the Court route, then - theoretically - we MAY be able to argue against the FOS limitation on claiming 8%. I have to admit I have no friggin' idea how to, though !!! I would, however, like to see it done !!!

Decisions.....decisions.......!!!!

[Angry Cat]

Re: FOS and PPI

At the end of the day, it is all about going back to the status quo prior to taking out the PPI.
Not rocket science!

[Turboman]

Re: FOS and PPI

Just when I thought I understood everything-------------my head is hurting again!!!!!!!!!!:confused2::confused2::confused2::c onfused2::confused2:

[Bill-K]

Re: FOS and PPI

Succinctly put by AC. All that Paul and I are spilling our guts over here, are the individual elements that make up the compound - and how they affect each other. Just take it ONE step at a time, mate - I think you're nearly there. The penny will drop - and I WILL know that.....in NO uncertain terms !!!!

FWIW - do NOT try to jump more than one hurdle at a time. They don't even have idiots doing that on You-Tube........or do they ?

In any event - you ain't one of them.

[Bill-K]

Re: FOS and PPI

I have seen somewhere that a credit card provider has stated that they are unable to reconstruct the account to its inception "due to the passage of time, information is no longer available". So the account was reconstructed minus quite a few years. The FOS have accepted this and advised the claimant to accept.

In belated response to this - and my apologies, Mr Muffet - This seems to be a fair outcome. The FOS has to be impartial (or so they reckon !!!)

So - IF the claimant has no evidence to support the claim, then I guess the FOS has to assume that there is no case to answer. If the claimant can provide evidence to support their claim for earlier years, then they have a case - but if neither party has anything, then the FOS are being asked to adjudicate on pure hot air.

FWIW, this seems to underline the importance of making damned sure that a DSAR request is complied with FULLY, as it is often the case that a lender will eventually come up with more than they originally said was available - when pushed.

[Paul210]

Re: FOS and PPI

In belated response to this - and my apologies, Mr Muffet - This seems to be a fair outcome. The FOS has to be impartial (or so they reckon !!!)

So - IF the claimant has no evidence to support the claim, then I guess the FOS has to assume that there is no case to answer. If the claimant can provide evidence to support their claim for earlier years, then they have a case - but if neither party has anything, then the FOS are being asked to adjudicate on pure hot air.

FWIW, this seems to underline the importance of making damned sure that a DSAR request is complied with FULLY, as it is often the case that a lender will eventually come up with more than they originally said was available - when pushed.

These are failry common, I agree that if the claimant cannot proove the premiums and the lender doesnt hold information then in a court it would be decided no case to answer and its fair that FOS take a similar stance, this is however only where outside the 6 year period.

I have seen cases where a lender cannot provide info for some months from within a 6 year period (changes in their internal records systems, corrupt files in their databases etc), in this event I've argued and often had the lender agree that they should take the average balance for a month based on the months they do hold and use this as substitiute for the months they are missing, this is a lottery for both sides as ppi premium can just as easily be overstated as understated, however this seems to be the fairest way to approach the problem.

Lenders go for this and I think FOS would too as they are supposed to reatain info for 6 years and where missing is their fault no the claimants, therefore the claimant should not be penalised.

[The Debt Star]

Re: FOS and PPI

I might be wrong but I don't think there is a hard and fast "6 year" rule for data retention. I don't believe the DPA stipulates that but rather that it comes from the FSA Handbook for financial organisations. In this the period oof data retention varies from 3, 6 years or even indefinitely depending on the product sold. See schedule on record keeping requirements http://fsahandbook.info/FSA/handbook/LI/2001/2001_8.pdf

[Paul210]

Re: FOS and PPI

I might be wrong but I don't think there is a hard and fast "6 year" rule for data retention. I don't believe the DPA stipulates that but rather that it comes from the FSA Handbook for financial organisations. In this the period oof data retention varies from 3, 6 years or even indefinitely depending on the product sold. See schedule on record keeping requirements http://fsahandbook.info/FSA/handbook/LI/2001/2001_8.pdf

the FSA min requirement on a statement is 3 years but given statute of limitations is 6 yrs a firm is expected to hold info for at least this long simply in case of any dispute, its not written in any particular rule or law as far as i'm aware but is a widely accepted standard within the industry.

[Turboman]

Re: FOS and PPI

Thanks Paul210

Paul & Bill

I can see the new rules are far more complex sooooo

I have already created a SS with

• Date of PPI
• PPI Amount
• Date of Balance incl TOTAL Interest on Statement
• Actual Balance on Statement
• Total Actual Interest on Statement

This includes 100 statements

Should I enhance this to include

• Purchases Interest £
• Cash Advance Interest £
• Actual APR/Monthly Interest % for both Purchases & Cash Advances
• Detailed Item s by date for Purchases £
• Detailed Item by date for Cash Advances

I can then reconstruct the account--ie--and also calculate the individual interest each period between purchases rather than by month

I am determined that I leave no stone unturned nor generalize with specific assumtions.--and I can work at a detailed level for a couple of days if thats what it takes

aahhh, I see (I think), yes, where the lender charges compound interest on premiums then I certainly think you could rely solely on the "put back in position" argument for the refund of such interest as thats what was implied on acceptance form by the lender when they state "put back in position".

These days most of the offers relating to cards that I see already take the compound interest charged on premiums into account although if the lender doesnt provide a complete breakdown of how they calculate then it can be a bit of a minefield (unless of course you have every statement for the card and the order in which they apply payments made by you from the original and any varied terms of the credit agreement) then you can restructure the account yourself. Where the account would have gone into a credit balance as a result of the restructure you need to be especially careful as no interest on anything previous can be allocated from that point, its not as simple as just working out the date of the premium and applying compound interest until the date of the offer and I dont think using a preprepared spreadsheet would take all the factors into account, I think it would need to be a bespoke calculation for each card. I know you and bill have some very clever sheets you use to work these out, If you want to send a copy over PM me for my email address and I'll have a look and see if theres anything you dont already take into account.

If you go to court arguing compound interest and your figures are wrong you may not only lose all credibility and therefore the case but also the lenders legal team would jump on that as an argument to try for a costs order...make sure beyond any possible doubt that your figures are 100% correct before you issue proceedings.

[Bill-K]

Re: FOS and PPI

Agreed, Turbo. Let's get ALL the data put into the spreadies. Perhaps - at a later date - we can ignore some of it. But, while we have it, then let's use it.

[Paul210]

Re: FOS and PPI

Also agree, the more detailed the calcs the better.

You also need to find a way of working out how the payment is approtioned to the balance, i.e. until recently the lowest interest rate transactions were cleared first and the transactions attracting the highest interest rates such as cash advances are paid off last. This means that more than a strict pro rata % of each payment may go to certain transactions rather than simply on an oldest transaction first.

I've got a basic idea of how can work this in if you want to send over the bare bones of the SS youve got so far I'll have a play and send back for you and Bill to work your magic on.

[Bill-K]

Re: FOS and PPI

Also agree, the more detailed the calcs the better.

You also need to find a way of working out how the payment is approtioned to the balance, i.e. until recently the lowest interest rate transactions were cleared first and the transactions attracting the highest interest rates such as cash advances are paid off last. This means that more than a strict pro rata % of each payment may go to certain transactions rather than simply on an oldest transaction first.

I've got a basic idea of how can work this in if you want to send over the bare bones of the SS youve got so far I'll have a play and send back for you and Bill to work your magic on.

Yeah - this 'multi-layering' is another complication of CC accounts, innit, Paul ? We need to try and 'mimic' what the mainframe computer does with our little Excel equivalent, don't we ?