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  • FIRST POST
    maxdp
    How FOS Calculate Refunds
    • #1
    • 31st Mar 09, 11:04 AM
    How FOS Calculate Refunds 31st Mar 09 at 11:04 AM
    The ways in which the FOS approach redress in different situations are set out below.

    CREDIT CARDS

    1. Where card account and the PPI are still in force.

    If the consumer agrees to cancellation of the PPI the financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year; and
    c) send the customer a statement showing the resulting balance on the account (with details of how it was calculated).

    2. Where the card account is still open but the PPI has been cancelled.

    The financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year; and
    c) send the customer a statement showing the resulting balance on the account (with details of how it was calculated.)

    3. Where the card account has been cleared and closed and the PPI has been cancelled:

    The financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year;
    c) pay the customer the difference between the revised closing balance and the original closing balance;
    d) pay the customer interest on that difference at 8% simple per year from the date of closure to the date of payment; and
    e) send the customer details of how the revised balance, the difference and the interest were calculated.

    FOS may also consider it appropriate for the financial business to pay the consumer additional compensation for any distress and inconvenience he or she has been caused, including where the financial business rejected a complaint which it knew (or should have known) would be upheld, If they consider such an award is appropriate this will be specified by the adjudicator.

    LOANS

    These are examples full publication can be found on Link following them


    Loan and PPI policy still in place at time of FOS decision.
    Lender agreed for the cancellation of the PPI policy and restructuring of loan. E.g.
    Overall loan repayments 250 per month but would have been 200 without PPI, term of policy was 60 months and complaint settled after 20 monthly payments.
    Return excess monthly payments of 50 x 20 payments up to date of settlement (1000)
    Add interest to each payment of 50 at 8%simple, from date of each payment until lender repaid.
    Arrange loan to be restructured, so remaining 40 monthly payments reduced to 200
    Pay borrower 300 for extra inconvenience caused.

    Loan and PPI policy terminated early before FOS decision.
    Overall loan was for 23,000 (monthly payments 430) – but it would have been 18,000 with monthly payments of 340 without PPI. Policy term was 60 months; loan and policy cancelled are 23 monthly payments.
    Borrower was required to pay 15,500 to settle the loan (after the business had taken account of the rebate of premium he was due of 1,200; but if he had not had PPI added to loan, the smaller loan of 18,000 would have cost 13,000 to settle at the same point.
    So borrower had paid lender 90 a month more than he would have done, had the financial business not mis-sold the PPI policy; and 2,500 more to settle the loan after 24 months.
    Return 24 monthly payments of 90 to date of settlement (2,160)
    Calculate difference between settlement costs incurred when borrower ended loan early and those he would have incurred had he settled the loan without the additional PPI element. (15,500 - 13,000 = 2,500) pay difference to borrower.
    Add interest to each payment of 90 at 8% simple, from date that excess was incurred.
    Pay borrower 400 for extra inconvenience.

    Loan and PPI policy ran to term before FOS decision
    Overall loan was 7,500 (monthly repayments of 250) – but it would have been 6,000 with monthly repayments of 200 without PPI. Term of Loan and policy 36 months. So borrower had paid 50 more per month than if PPI not been mis-sold.
    Return 50 x 36 months of the loan (1,800)
    Add interest to each excess payment of 50 at 8% simple, from date that excess was incurred.
    Pay 200 for extra inconvenience.


    SUCCESSIVE SINGLE-PREMIUM PAYMENT PROTECTION INSURANCE

    The exact approach to calculating compensation will depend on the overall circumstances of the individual complaint. In particular the calculations of compensation will vary according to the present status of the most recent loan and PPI policy. The financial business will be expected to consider the four scenarios set out below to ensure that the calculations are appropriate.

    1. the most recent loan and the most recent PPI policy are still in force;
    2. the most recent loan is still in force but the most recent PPI has been cancelled or has expired;
    3. all the loans have been settled early and all the PPI has been cancelled;
    4. the most recent loan and the most recent PPI policy have run the full term.

    plus also additional compensation for any distress/inconvenience including where the financial business reflected a complaint which if knew (or should have known) FOS would uphold.

    Subject to the consumer agreeing to cancel any PPI policy that was mis-sold and is stillin force the financial business should:

    (A). In respect of each loan:
    - recalculate the loan and the payments to what they would have been if the consumer had taken the loan without PPI
    - repay to the consumer the amounts by which the payments actually made exceeded the recalculated payments;
    - pay the consumer interest on each of these amounts at 8% per year simple from the date each payment was made to the date the compensation is paid;
    - recalculate the balance that would have been outstanding at the end of each loan had the recalculated loan not included PPI.

    (B) Calculate how much of the balance that was carried forward to the subsequent loan related to the cost of the PPI policy taken out for the previous loan: and
    - repay to the consumer all amounts paid under each subsequent loan in respect of the carried forward balance, including interest and charges;
    - pay the consumer interest on each of these amounts at 8% per year simple from the date each payment was made to the date the compensation is paid.

    (C) Where the most recent loan is still in force and it includes the cost of the most recent PPI policy and/or any balance carried forward from the cost of previous
    PPI Policies, the financial business should restructure the loan or arrange for the loan to be restructured so that the balance is reduced to the level that it would
    have been if it had not included any of the costs of the mis-sold PPI policies.

    (D) Set out in writing for the consumer details of the calculations under (A) (B) and (C).

    default charges

    Mrs Q had got a little behind with her loan repayments. The lender had added default charges, and subsequently interest on those charges. We required the financial business to arrange for the restructuring of the loan – and to write off any charges (and any interest on them) which would not have arisen, if the monthly payment had been the lower amount that would have applied if there had been no PPI policy.
    -Thank you to Marshallka-


    These are examples full publication can be found on this link
    www.financial-ombudsman.org.uk/publications/technical_notes/ppi/redress.html
    Last edited by maxdp; 04-08-2009 at 2:31 PM. Reason: Updating added how to work out refinanced loans.
Page 1
    • di3004
    • By di3004 31st Mar 09, 11:10 AM
    • 42,529 Posts
    • 56,679 Thanks
    di3004
    • #2
    • 31st Mar 09, 11:10 AM
    • #2
    • 31st Mar 09, 11:10 AM
    The ways in which the FOS approach redress in different situations are set out below.

    1. Where card account and the PPI are still in force.

    If the consumer agrees to cancellation of the PPI the financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year; and
    c) send the customer a statement showing the resulting balance on the account (with details of how it was calculated).

    2. Where the card account is still open but the PPI has been cancelled.

    The financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year; and
    c) send the customer a statement showing the resulting balance on the account (with details of how it was calculated.)

    3. Where the card account has been cleared and closed and the PPI has been cancelled:

    The financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year;
    c) pay the customer the difference between the revised closing balance and the original closing balance;
    d) pay the customer interest on that difference at 8% simple per year from the date of closure to the date of payment; and
    e) send the customer details of how the revised balance, the difference and the interest were calculated.

    FOS may also consider it appropriate for the financial business to pay the consumer additional compensation for any distress and inconveneience he or she has been caused, including where the financial business rejected a complaint which it knew (or should have known) would be upheld, If they consider such an award is appropriate this will be specified by the adjudicator.
    Originally posted by maxdp

    Good one Max, I think you should ask if this can be a Sticky.
    The one and only "Dizzy Di"
  • dreamer33
    • #3
    • 3rd Apr 09, 6:42 PM
    • #3
    • 3rd Apr 09, 6:42 PM
    The ways in which the FOS approach redress in different situations are set out below.

    1. Where card account and the PPI are still in force.

    If the consumer agrees to cancellation of the PPI the financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year; and
    c) send the customer a statement showing the resulting balance on the account (with details of how it was calculated).

    2. Where the card account is still open but the PPI has been cancelled.

    The financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year; and
    c) send the customer a statement showing the resulting balance on the account (with details of how it was calculated.)

    3. Where the card account has been cleared and closed and the PPI has been cancelled:

    The financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year;
    c) pay the customer the difference between the revised closing balance and the original closing balance;
    d) pay the customer interest on that difference at 8% simple per year from the date of closure to the date of payment; and
    e) send the customer details of how the revised balance, the difference and the interest were calculated.

    FOS may also consider it appropriate for the financial business to pay the consumer additional compensation for any distress and inconveneience he or she has been caused, including where the financial business rejected a complaint which it knew (or should have known) would be upheld, If they consider such an award is appropriate this will be specified by the adjudicator.
    Originally posted by maxdp
    Excellent max well done xxxxxxxxxxxxxx
  • ccmug
    • #4
    • 21st Apr 09, 9:53 PM
    • #4
    • 21st Apr 09, 9:53 PM
    [QUOTE=maxdp;20257073]2. Where the card account is still open but the PPI has been cancelled.

    The financial business should:

    a) reconstruct the account by removing any premiums in respect of the PPI and any interest or charges in respect of those premiums;
    b) if that produces a credit balance for any period, credit interest on that balance for that period at 8% simple per year; and
    c) send the customer a statement showing the resulting balance on the account (with details of how it was calculated.)


    Max
    Do you have this official from FOS?

    I have spoken to them twice now re an Egg Credit Card PPI refund of premiums and 8% only, the first guy said that is all I was entitled to, the second guy said I should make a claim to them for interest charged and they would consider it because it seemed a reasonable argument - he said that the statement quoted did not emanate from them.
    If you have it, I would like to refere to is origin in my complaint.

    Thanks
  • maxdp
    • #5
    • 22nd Apr 09, 12:00 PM
    • #5
    • 22nd Apr 09, 12:00 PM
    Hi cannot send a copy as am away at moment. The information came to me from a letter they sent me. Have you had a look on their web site on how they settle these.
    • Turboman
    • By Turboman 21st May 09, 10:57 AM
    • 256 Posts
    • 699 Thanks
    Turboman
    • #6
    • 21st May 09, 10:57 AM
    • #6
    • 21st May 09, 10:57 AM
    Max--just a comment in red

    The ways in which the FOS approach redress in different situations are set out below.

    LOANS

    These are examples full publication can be found on Link following them


    Loan and PPI policy terminated early before FOS decision.
    Overall loan was for 23,000 (monthly payments 430) but it would have been 18,000 with monthly payments of 340 without PPI. Policy term was 60 months; loan and policy cancelled are 23 monthly payments.
    Borrower was required to pay 15,500 to settle the loan (after the business had taken account of the rebate of premium he was due of 1,200; but if he had not had PPI added to loan, the smaller loan of 18,000 would have cost 13,000 to settle at the same point.
    So borrower had paid lender 90 a month more than he would have done, had the financial business not mis-sold the PPI policy; and 2,500 more to settle the loan after 24 months.
    Return 24 monthly payments of 90 to date of settlement (2,160)
    Calculate difference between settlement costs incurred when borrower ended loan early and those he would have incurred had he settled the loan without the additional PPI element. (15,500 - 13,000 = 2,500) pay difference to borrower. I would have thought 8% is due on this as well as the customer has been deprived of 2500 for the period
    Add interest to each payment of 90 at 8% simple, from date that excess was incurred.
    Pay borrower 400 for extra inconvenience.


    www.financial-ombudsman.org.uk/publications/technical_notes/ppi/redress.html
    Originally posted by maxdp
    aka Calculator

    My grandmother started walking five miles a day when she was 60. Now she's 97 years old and we don't know where the hell she is.

  • maxdp
    • #7
    • 21st May 09, 11:03 AM
    • #7
    • 21st May 09, 11:03 AM
    Thank you Turboman that makes sense.
  • selecta_c
    • #8
    • 23rd Jul 09, 6:05 PM
    • #8
    • 23rd Jul 09, 6:05 PM
    I have just heard from the FOS saying Welcome Finance have agreed to settle my PPI claim against them.I payed off my loan with them early in fact it had run 3 months of a 3 year term when i settled it.Looking at my settlement figure of 5321 on a 4000 loan i do not think i got my full entitlement of PPI refunded when i settled.The PPI cost 1835.Will the FOS took this up with Welcome and force them to pay it?
    • di3004
    • By di3004 23rd Jul 09, 6:07 PM
    • 42,529 Posts
    • 56,679 Thanks
    di3004
    • #9
    • 23rd Jul 09, 6:07 PM
    • #9
    • 23rd Jul 09, 6:07 PM
    I have just heard from the FOS saying Welcome Finance have agreed to settle my PPI claim against them.I payed off my loan with them early in fact it had run 3 months of a 3 year term when i settled it.Looking at my settlement figure of 5321 on a 4000 loan i do not think i got my full entitlement of PPI refunded when i settled.The PPI cost 1835.Will the FOS took this up with Welcome and force them to pay it?
    Originally posted by selecta_c
    Hi there, and well done.

    I would mention this to the FOS to be sure, they should look into this for you.
    The one and only "Dizzy Di"
  • maxdp
    I have just heard from the FOS saying Welcome Finance have agreed to settle my PPI claim against them.I payed off my loan with them early in fact it had run 3 months of a 3 year term when i settled it.Looking at my settlement figure of 5321 on a 4000 loan i do not think i got my full entitlement of PPI refunded when i settled.The PPI cost 1835.Will the FOS took this up with Welcome and force them to pay it?
    Originally posted by selecta_c
    Hi There if you feel that they have not settled the figures you think then you could talk to them in the first place and ask for more detailed settlement figures. If you are not happy then go back to the FOS
  • maxdp
    Have updated information in first post and have included how to work out refinanced Loans. Or in fact how the Business should do this.
  • marshallka
    Have updated information in first post and have included how to work out refinanced Loans. Or in fact how the Business should do this.
    Originally posted by maxdp
    Was this on before also maxdp

    default charges

    Mrs Q had got a little behind with her loan repayments. The lender had added default charges, and subsequently interest on those charges. We required the financial business to arrange for the restructuring of the loan – and to write off any charges (and any interest on them) which would not have arisen, if the monthly payment had been the lower amount that would have applied if there had been no PPI policy.

    I will delete if it was....?
  • maxdp
    Was this on before also maxdp

    default charges

    Mrs Q had got a little behind with her loan repayments. The lender had added default charges, and subsequently interest on those charges. We required the financial business to arrange for the restructuring of the loan and to write off any charges (and any interest on them) which would not have arisen, if the monthly payment had been the lower amount that would have applied if there had been no PPI policy.

    I will delete if it was....?
    Originally posted by marshallka
    Thank you have added above.
  • pinknico
    Max can you explain in simple(for me!) terms section B of the new bit you have added thank you.
    DS1 12/10/04
    DS2 13/07/06
    DD1 06/12/07
  • maxdp
    OK Will give it a go. If you say paid 1000.00 of PPI on your first loan and they refunded the balance to you. Well when you refinance to your second loan because you paid 1000. of PPI on the first loan you would not have paid so much off the balance on that loan so that 1000.00 would make you take out 1000. extra on the second loan. etc do you see what I mean.
  • pinknico
    Yep got that but how does the refund work? getting myself confused in what gets taken off that hasnt been paid yet and what gets paid back that has been paid!
    DS1 12/10/04
    DS2 13/07/06
    DD1 06/12/07
  • maxdp
    OK It is the same as the other in as much as they have to calculate the three loans as if you had never had PPI so they will work that out then deduct the refund you would have been given when you settled and refinanced. I understand the banks are getting a program together so they can work out these refunds. It does not always work out more though so I am told hopefully FOS will be able to support with this when decisions are being made.
  • pinknico
    Thanks Max, that now makes sense.
    DS1 12/10/04
    DS2 13/07/06
    DD1 06/12/07
  • tigerpsg
    Thanks maxdp, for the post.
    Can someone please help me determine whether PPI refunded by the bank has been calculated properly?
    Details of the loan:
    loan - 15,000.00
    repayment protection 6,095.55
    Date loan was taken out - 17 June 2005
    Term of loan - 84 months.
    PPI refunded on 08/08/09
    PPI Premium - 6,095.55
    Interest calculated on PPI - 1685.56
    Total amount refunded = 7781.11 (08/08/09 )
    I would like to know whether that's the maximum the bank should be paying me back?
    regards, tigerpsg
    • di3004
    • By di3004 12th Aug 09, 10:43 PM
    • 42,529 Posts
    • 56,679 Thanks
    di3004
    Hi there

    Hopefully someone will be along to have a look for you soon, sorry I am not the one to work out calculations...., good luck though.
    The one and only "Dizzy Di"
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