Can Anyone Assist with understanding PPI Interest calculation

[Silvershine]

Hi there can anyone help me? I have a claim lodged with the FSO and am having difficulty understanding the breakdown of interest, Is the 8% simple interest worked out for the duration of the loan only or until the bank paid out? i.e. FSO website uses the term settlement (but does not specify what settlement means - the bank's or ours) does it mean the date of our final payment of the loan (July 1995) or when the bank paid us an initial "good will gesture" (21/02/2015)
where the consumer’s PPI policy and loan had run their full term before the business calculated the compensation

what we know

• you took out a loan of £3,000 over 3 years;
• we added the cost of your PPI premium to your loan. That was £450, so your total loan was for £3,450;
• you paid monthly payments of £110 per month for 3 years until your loan was repaid – a total of £3,960; and
• your loan ended 2 years ago.

what we have calculated

• if you had instead taken out your loan without PPI you would have paid monthly payments of £95 per month for 3 years – a total of £3,420.

what we will do

• We will pay you the difference between the monthly payments you paid (£110 per month) and what they would have been without the PPI policy (£95 per month), which is £15 per month (or £540 in total). We will also add interest at 8% per year simple to each overpayment from the date it was paid until the date of settlement, which in this case comes to an additional £120.
• The total we will pay you is therefore £540 plus interest of £120.

[EXC]

Re: Can Anyone Assist with understanding PPI Interest calculation

Hi there can anyone help me? I have a claim lodged with the FSO and am having difficulty understanding the breakdown of interest, Is the 8% simple interest worked out for the duration of the loan only or until the bank paid out? i.e. FSO website uses the term settlement (but does not specify what settlement means - the bank's or ours) does it mean the date of our final payment of the loan (July 1995) or when the bank paid us an initial "good will gesture" (21/02/2015)

The 8% simple interest is calculated on all PPI payments you made including the interest on the money you borrowed to pay the PPI, from the dates you paid for the PPI to the date you were awarded settlement.

This is distinct from (and over & above) the interest itself you paid on the PPI as part of the loan.

[Bazza]

Re: Can Anyone Assist with understanding PPI Interest calculation

Was the loan taken out before April 1993 ?

The last paragraph below might be of some interest to you if your complaint with FOS is regarding redress of PPI.

redress for mis-sold single-premium PPI attached to a loan

These policies have a single upfront premium. The cost of the policy – the single premium – is added to the loan. Interest is charged on the premium, and the monthly loan repayments include repayment of the premium and the interest on it.
our approach

Where a consumer was mis-sold a single-premium PPI policy and the policy remains in force, we will tell the business to cancel it. We will then tell the business to take steps to compensate the consumer fairly. The way we tell the business to calculate fair redress will depend on the consumer’s circumstances and the current position of the loan, but it will normally involve two steps:

• A restructuring of the loan (if it is still in place) so that the amount the consumer owes, the monthly repayments, the term and the charges reflect those that would have applied, if the loan had been arranged without the PPI policy.
  
  If the loan was repaid early, we will usually tell the business to compare the amount the consumer paid to settle the loan with what they would have paid if the PPI had not been added to the loan.

• A calculation of how much more the consumer has paid each month than they would have paid if the loan had been arranged without the PPI policy.
  
  We will tell the business to add interest to each overpayment to compensate the consumer for the loss of use of their money. Our usual rate is 8% per year simple from 1 April 1993 – and at 15% simple per year before that. Further information about compensation for the loss of use of money and the tax position on that compensation can be found in our note is compensation taxable?

[Silvershine]

Re: Can Anyone Assist with understanding PPI Interest calculation

[QUOTE=Bazza;573421]Was the loan taken out before April 1993 ?

The last paragraph below might be of some interest to you if your complaint with FOS is regarding redress of PPI.

redress for mis-sold single-premium PPI attached to a loan

These policies have a single upfront premium. The cost of the policy – the single premium – is added to the loan. Interest is charged on the premium, and the monthly loan repayments include repayment of the premium and the interest on it.
our approach

Where a consumer was mis-sold a single-premium PPI policy and the policy remains in force, we will tell the business to cancel it. We will then tell the business to take steps to compensate the consumer fairly. The way we tell the business to calculate fair redress will depend on the consumer’s circumstances and the current position of the loan, but it will normally involve two steps:

• A restructuring of the loan (if it is still in place) so that the amount the consumer owes, the monthly repayments, the term and the charges reflect those that would have applied, if the loan had been arranged without the PPI policy.
  
  If the loan was repaid early, we will usually tell the business to compare the amount the consumer paid to settle the loan with what they would have paid if the PPI had not been added to the loan.

• A calculation of how much more the consumer has paid each month than they would have paid if the loan had been arranged without the PPI policy.
  
  We will tell the business to add interest to each overpayment to compensate the consumer for the loss of use of their money. Our usual rate is 8% per year simple from 1 April 1993 – and at 15% simple per year before that. Further information about compensation for the loss of use of money and the tax position on that compensation can be found in our note is compensation taxable?

[/QUOTE

Many thanks for this

It has taken over 2yrs and 3 offer rejections to try and get an agreement and I'm still not there, so I don't understand what I am doing incorrectly. I still don't agree with Barclay's latest offer and it is the 3rd rejection of their offer . However I have had an email from the FSO stating:

From July 1990 until 1 April 1993, Barclays calculated 15% simple interest on each monthly premium made from the date you made each payment up to the date of the calculations (Feb 2015).
From 1 April 1993 to September 1995 (which is when the PPI policy ended), Barclays calculated 8% simple interest on each monthly premium made from the date you made each payment up to the date of the calculations (Feb 2015). So, the last premium the 8% simple interest was calculated on was the last premium payment you had made before the PPI policy ended.
I really don't understand these 2 paragraphs as they seem contradictory. Firstly stating 15% until Apr 93 (which is contained in the information you pasted into this thread and is correct - they had not originally calculated it as 15% and it was the reason for my 2nd rejection). It then states that 8% is calculated up until Feb 2015 - which is how I calculated it, but then it states that 8% interest was calculated on the last premium made at the policy end (Sept 1995) so which is it?
However, when I reviewed your spreadsheet, you had continued calculating the 8% simple interest on premiums after September 1995 up to date (Feb 2015), which is why the offer you have calculated is higher than Barclays’.
It was explained that since you didn’t make any more premium payments after September 1995, 8% simple interest will not be calculated on any premiums after this date. This does not mean that you are not being compensated up to date, as each premium payment you made has been calculated up to date.
Again I don't understand this paragraph as it (again) seems contradictory. Firstly stating 8% simple is calculated only until the PPI was paid in full (£1511.13 (plus £996.21 interest) over 60 months) which was Sept 1995. It then states that this does not mean that I am not being compensated up to todate (Feb 2015) as each premium payment I have mad has been calculated to date, again which is it? I really can't get my head around this last sentence.

My calculation is as follows:
£41.82 (monthly repayment) multiplied by 12 = £501.80 per annum divided by 365 = £1.3749 daily multiplied by 15% simple interest = £0.20624 daily then multiplied by 1023 days divided by 365 days total (1023 days from date of loan until 30/03/93 followed by £0.20624 multiplied by 1022 divided by 365 and counted down to 1 day) TOTAL £295.95.

Followed by:
£41.82 multiplied by 12 = £501.80 per annum divided by 365 = £1.3749 daily multiplied by 8% simple interest = £0.10999 daily then multiplied by 8005 divided by 365 days total (8005 days from 31/03/93 until 28/02/15 followed by £0.10999 multiplied by 8004 divided by 365 and counted down to 1 day) TOTAL £9656.43.

In summary:
Total Statutory compensation £9952.38
Original Loan £1513.11
Interest £996.21
Amount Due in total £12461.70
Minus 20% income tax (on compensation of £9952.38) £1990.48
Total Due £10,471.22
Paid by Barclays to date (after tax deduction) £6373.84
Outstanding £4,094.38

The FOS seem to be saying that they uphold the 6373.84 offer paid by Barclays

I really appreciate your help Thank you



- - - Updated - - -

Many thanks for this

It has taken over 2yrs and 3 offer rejections to try and get an agreement and I'm still not there, so I don't understand what I am doing incorrectly. I still don't agree with Barclay's latest offer and it is the 3rd rejection of their offer . However I have had an email from the FSO stating:

From July 1990 until 1 April 1993, Barclays calculated 15% simple interest on each monthly premium made from the date you made each payment up to the date of the calculations (Feb 2015).
From 1 April 1993 to September 1995 (which is when the PPI policy ended), Barclays calculated 8% simple interest on each monthly premium made from the date you made each payment up to the date of the calculations (Feb 2015). So, the last premium the 8% simple interest was calculated on was the last premium payment you had made before the PPI policy ended.
I really don't understand these 2 paragraphs as they seem contradictory. Firstly stating 15% until Apr 93 (which is contained in the information you pasted into this thread and is correct - they had not originally calculated it as 15% and it was the reason for my 2nd rejection). It then states that 8% is calculated up until Feb 2015 - which is how I calculated it, but then it states that 8% interest was calculated on the last premium made at the policy end (Sept 1995) so which is it?
However, when I reviewed your spreadsheet, you had continued calculating the 8% simple interest on premiums after September 1995 up to date (Feb 2015), which is why the offer you have calculated is higher than Barclays’.
It was explained that since you didn’t make any more premium payments after September 1995, 8% simple interest will not be calculated on any premiums after this date. This does not mean that you are not being compensated up to date, as each premium payment you made has been calculated up to date.
Again I don't understand this paragraph as it (again) seems contradictory. Firstly stating 8% simple is calculated only until the PPI was paid in full (£1511.13 (plus £996.21 interest) over 60 months) which was Sept 1995. It then states that this does not mean that I am not being compensated up to todate (Feb 2015) as each premium payment I have mad has been calculated to date, again which is it? I really can't get my head around this last sentence.

My calculation is as follows:
£41.82 (monthly repayment) multiplied by 12 = £501.80 per annum divided by 365 = £1.3749 daily multiplied by 15% simple interest = £0.20624 daily then multiplied by 1023 days divided by 365 days total (1023 days from date of loan until 30/03/93 followed by £0.20624 multiplied by 1022 divided by 365 and counted down to 1 day) TOTAL £295.95.

Followed by:
£41.82 multiplied by 12 = £501.80 per annum divided by 365 = £1.3749 daily multiplied by 8% simple interest = £0.10999 daily then multiplied by 8005 divided by 365 days total (8005 days from 31/03/93 until 28/02/15 followed by £0.10999 multiplied by 8004 divided by 365 and counted down to 1 day) TOTAL £9656.43.

In summary:
Total Statutory compensation £9952.38
Original Loan £1513.11
Interest £996.21
Amount Due in total £12461.70
Minus 20% income tax (on compensation of £9952.38) £1990.48
Total Due £10,471.22
Paid by Barclays to date (after tax deduction) £6373.84
Outstanding £4,094.38

The FOS seem to be saying that they uphold the 6373.84 offer paid by Barclays

I really appreciate your help Thank you

[Turboman]

Re: Can Anyone Assist with understanding PPI Interest calculation

Sorry. .been off and on with NHS.LOL

Do you still need any help?

[robin-hood]

Re: Can Anyone Assist with understanding PPI Interest calculation

If you can post the following information, I will calculate your redress for you.
1. Amount of PPI added to the loan.
2. Interest rate of the loan.
3. Duration of the loan.
4. Start Date of the Loan.
5. IF repaid early, the date the loan was repaid.
6. Date of the Barclays Offer to which statutory interest has been calculated.

We Take From The Greedy and Give Back To The Needy!!

[Joannewright08]

Hi I need some help please I took out a loan in 1999 £750.00 for 18 months ppi was added to start of loan therefore included monthly repayments ppi was £67.65 my repayments were £74.47 per moth but on 29/3/2000 I took another loan out for £5600.00 which again ppi was added to start of loan £899.76 making this £6499.76 for 36 monthly repayments was £225.36 could you please advise how the ppi calculation will be worked out and interest I think the apr was between 19% - 24% I repaid the loan on 28/2/2003 but it says on statements that I repaid total 9381.27 please can u help me

[Joannewright08]

[QUOTE=robin-hood;n972168]Re: Can Anyone Assist with understanding PPI Interest calculation

If you can post the following information, I will calculate your redress for you.
1. Amount of PPI added to the loan.
2. Interest rate of the loan.
3. Duration of the loan.
4. Start Date of the Loan.
5. IF repaid early, the date the loan was repaid.
6. Date of the Barclays Offer to which statutory interest has been calculated.

Hi I need some help please I took out a loan in 1999 £750.00 for 18 months ppi was added to start of loan therefore included monthly repayments ppi was £67.65 my repayments were £74.47 per moth but on 29/3/2000 I took another loan out for £5600.00 which again ppi was added to start of loan £899.76 making this £6499.76 for 36 monthly repayments was £225.36 could you please advise how the ppi calculation will be worked out and interest I think the apr was between 19% - 24% I repaid the loan on 28/2/2003 but it says on statements that I repaid total 9381.27 please can u help me

[robin-hood]

[QUOTE=Joannewright08;n1400541]

Re: Can Anyone Assist with understanding PPI Interest calculation

If you can post the following information, I will calculate your redress for you.
1. Amount of PPI added to the loan.
2. Interest rate of the loan.
3. Duration of the loan.
4. Start Date of the Loan.
5. IF repaid early, the date the loan was repaid.
6. Date of the Barclays Offer to which statutory interest has been calculated.

Hi I need some help please I took out a loan in 1999 £750.00 for 18 months ppi was added to start of loan therefore included monthly repayments ppi was £67.65 my repayments were £74.47 per moth but on 29/3/2000 I took another loan out for £5600.00 which again ppi was added to start of loan £899.76 making this £6499.76 for 36 monthly repayments was £225.36 could you please advise how the ppi calculation will be worked out and interest I think the apr was between 19% - 24% I repaid the loan on 28/2/2003 but it says on statements that I repaid total 9381.27 please can u help me

Using 20%pa for both loans and a start date of 1/1/1999 for the first. Assuming that you received a small rebate of around £17 when you re-financed, the redress on the first loan is £153.02 at today's date. The second loan has redress of £2687.82 with a rebate on closure of £65.24. So this claim for both loans will generate redress of £2840.84 at today's date. The reason that I keep saying "today's date" is that all redress comes with statutory interest at 8%pa on each payment that you made - so the more time that elapses, the larger the amount of redress! To give you an idea of how important this can be, the statutory interest alone on your second loan is £1550.91 at today's date.

[Joannewright08]

Hi thank you I’ve got a letter it’s says 899.76. Ppi added to the start of the loan 29/2/2000 interest accrued due to ppi 232.49
=1132.25
ppi refund due 1132.25
8% interest statutory comp on ppi 1159.76
additional 8% intere payable due to residual ppi 59.35
income tax 242.62
total refund due 2114.65

first loan ppi premium 67.75
intersst 4.55
77.23
8% per annum simple ppi overpayments 28.43
income tax 5.68
total refund due 94.98
is that how u did it

[robin-hood]

Hi thank you I’ve got a letter it’s says 899.76. Ppi added to the start of the loan 29/2/2000 interest accrued due to ppi 232.49
=1132.25
ppi refund due 1132.25
8% interest statutory comp on ppi 1159.76
additional 8% intere payable due to residual ppi 59.35
income tax 242.62
total refund due 2114.65

first loan ppi premium 67.75
intersst 4.55
77.23
8% per annum simple ppi overpayments 28.43
income tax 5.68
total refund due 94.98
is that how u did it

So you have been offered £2209.63 - I said £2840.84. There are many reasons why there can be a shortfall on my figure. Main examples are finance rates could have been lower than you estimated, you may have missed some payments or been in arrears, you may have already had rebates if the PPI was terminated early, The only way that I can give you a definitive answer is to see all the docs including the original credit agreement along with the offer letter. This is clearly not possible on a public forum. Your figures above indicate that your interest rates were around 15.9% which is lower than the 20% I used from your estimate of 19% - 24%. This would reduce both the Account and Statutory interest amounts paid in line with what you have been offered. So I would contact the firm and ask them if any of my issues above applies to you and if they confirm that your rates were around 15% then the PPI offer looks to be in the right ball park.

Of more concern is the fact that you repaid £9381.27 on an amount borrowed of £6500. You have already said that the monthly payments were £225.86. This amount x 36 = £8130.96. So why have you repaid £1250.31 more than expected. There may be a very good reason. I would speak to the firm and ask them to send you a full statement so that you can see exactly what you were charged and why. Also ask them why you repaid more than £225.86 x 36. In order to arrive at a total repaid of £9381, the interest rate would have had to have been around 25.6% with a monthly payment of £260.51 - which does not make sense with the PPI offer or your monthly figure of £225.86. Something does not add up!

[Joannewright08]

Ok thank you for your help