Confusing letter from Barclays - can you make sense of it?

[Deleted User]

Hello,

In April 2005 I took out a graduate loan with Barclays for £10k. They added PPI onto this, but I didn't ask for it, so in January 2006 I visited the branch (when I realised) and asked the bank to remove the PPI.

They did this - and set up a new loan to replace the old one, but without the PPI. They said that they had to start a new loan (sans PPI) in order to supersede the one that had PPI.

At the time, I received a refund of PPI totalling £306.49 - this corresponded to PPI paid between January and March 2006 - it was a gesture made by the branch because it took them two months to remove the insurance.

A few months ago (July), I wrote the Barclays because I haven't got a copy of my original loan agreement (2005) - and nor do any of the branches. I wanted to understand what had happened when I removed the PPI from my loan agreement, because I had paid 7 payments of £242 prior to the PPI being removed, yet these payments didn't seem to have been applied to the new loan once the PPI had been removed. Also - as per the MSE guidance - I wanted a refund of all PPI paid, not just the refund I'd already received from January - March 2006.

Now, thanks to MSE, I understand quite a bit about loans and how the rule of 78 works, and how initial payments go towards interest and not the capital, but I wrote to Barclays because I was confused about the following:

When I removed the PPI, my understanding is that the banks were not allowed to place you in a position inferior to the one you were in before the PPI.

I was concerned that Barclays had replaced the old loan with a new one for the same amount, but that my payments made so far had not been carried across because they had instead been applied to the upfront interest (and so had been written off - does that make sense?).

Or, in other words, just because I wanted PPI removed, Barclays had changed my loan and all the payments I had made on the old loan were pointless.

Anyway, I got a letter back from Barclays which states the following:

"Following my investigation your complaint has been partly upheld. Your original Graduate Loan was for £10,000 and the Payment Protection was £1,786.69. There were seven payments made of £242.10...

...when your loan account was settled [in 2006, when they removed the PPI], the new loan was opened for £10,000. A refund of £1,196.06 was made for the insurance involved with your original loan to your current account on 2 May 2006. The loan amount was not reduced as the payments were not refunded by the branch [my bold, for emphasis]".

Now, I'm totally confused by this - I can't understand what's going on.

Firstly, no refund was made to my current account. I don't actually think this is what the letter intended to say - I think what they mean is that when the new loan repaid the old one, they 'cancelled out' the PPI automatically, so I would not have seen this money (as it was never mine in the first place) (i.e. it was refunded to the new loan).

When they say 'payments were not refunded by the branch', this is the bit that confuses me. Does this mean that the 7 payments I had made of £242 were not refunded? In which case, where did they go? Why were they not refunded - and should they have been?

I understand that in other cases, people who cancel/change their loans early into their loan period often wonder why they still owe more than they borrowed (e.g. the idea of upfront interest). But I also understand - correct me if I'm wrong - that if a bank removes PPI then the customer mustn't be placed in a worse position because of the refund. Am I right in thinking that because I've removed my PPI, they've taken a new loan and so have wiped out my previous seven payments, when in fact these should have been applied towards the 'new' loan of £10k?

Barclays said my complaint was 'partly upheld', but didn't explain what they meant by this. The rest of the letter doesn't state that they're going to do anything, or that I'm due any money back, or which bit they upheld. So, I'm totally confused.

Can anyone else make sense of it - at least until Monday when I have the chance to phone them up?

I'm going to write back and reclaim all the PPI I had paid (because I was clearly mis-sold it - being a student at the time and without a job) but I'm confused as to whether I am entitled a refund of the 7 payments of £242. My understanding of this is that it's only because I asked for my PPI to be refunded that they've wiped out my payments of £242.

Can anyone help?

[Deleted User]

Just to clarify my comments on this as I was a bit waffly earlier:

I had a loan in 2005, with PPI.
I asked for the PPI to be removed, in 2006.
Barclays removed the PPI, but had to take out a new loan in order to do so
The payments I made on the old loan weren't applied to the new one, so were made in vain

I had made 7 payments of £242 on the old loan (£1,694), but I don't know where this money went.

The new loan was for £10k, which was the same amount as the old loan. My understanding is that if I remove PPI the banks are obliged (as part of all this PPI refund business) not to place me in an inferior position after the removal of PPI. e.g. they can't change the interest of terms.

It looks to me that just because I've asked to remove PPI, they've replaced the old loan with a new one, have applied upfront interest again and so the £1,694 I'd paid has disappeared into thin air: or, was paid towards the interest on the original loan. When the second loan took effect, they applied all the interest upfront again, but they should have taken my 7 payments to do date into account.