Really confusing situation: any maths brains out there?

ampersand

Another one I've just stumbled upon by chance, but bunglejemson, a question:
I know you are one of many in like situations, but you are articulate and your case is sound, so why not put it to The beloved Grauniad's Martin-lite. They DO get results.
They can take the angle of a student and make a worthy case of and for you -
It is not as if you have not been doing all you can.

Capital Letters - Steve Playle[he's the new man] - email:[EMAIL="capital.letters@guardian.co.uk"]capital.letters@guardian.co.uk[/EMAIL]

Very good luck to you; keep us informed.

p.s. You could link him into this Thread, or do a copy and send to him.

[Deleted User]

Thanks for your advice - I might drop that guy an email.

The whole system is s shambles really - and I wonder how many other people are in the same situation (where the banks are restructuring loans to recoup refunds)?

I just switched banks to First Direct and they seem quite good so far. I can't wait for the day I can leave Barclays. I've already drafted the 'farewell' letter I'm going to send them!

[Deleted User]

Barclays have just responded with this letter:

Dear Mr XXXXX.

I am sorry that you have had to contact us again regarding this matter.

The loan payments that were made were not refunded to the loan account. The branch arranged the new loan for £10,000 but did not refund any payments to you.

I am unable to advise why the branch credited the Insurance to your current account and not your loan.

---

Here's my latest response:


Thank you for your recent letter dated 22nd October 2009, in response to my complaint reference 100B5FTD.

I am contacting your further to provide an additional reply to my complaint, illustrating why the complaint was made and to show you what I believe the problem to be.

I will try to be as clear as possible in my explanation, although it’s quite a complex situation to please bear with me.

The facts

In April 2005 I took out a loan for £10k @ 7.9% over 5 years. This had PPI added to it (£1,789) which meant that monthly repayments were £242.
In May 2006, PPI was removed – at my request – and a new loan (without PPI) was opened by the Smithfield Branch to replace the old one. Two refunds were made (£1,502 total) direct to my current account.

The issues

The crux of the issue is twofold: firstly, I believe that I was mis-sold the PPI in the first instance. I was unemployed at the time it was added to the loan (as I was a student) and I already had existing cover provided through my job offer at the time. I wasn’t aware that PPI was being added, hence me asking for it to be removed in 2006 once I had discovered it had been applied.

Secondly, regardless of whether I was or was not mis-sold PPI, I believe that Barclays acted incorrectly in the way that they removed PPI from my graduate loan. I am not complaining ‘for the sake of it’: I have lost several thousand pounds as a result!

Here is why I believe there is an issue:

FSA Guidelines state that if a customer requests the removal of PPI, they must be placed in a position after its removal that is not inferior to the position they were in before. So, for example, in asking for PPI to be removed, Barclays can’t alter interest rates to my disadvantage.

The first issue is that Barclays should – when they removed PPI – have put me in a position as if PPI had never been applied. I believe that what has happened is that PPI has been removed, but despite several letters and my original complaints to the branch, you have not addressed my complaint that it was ‘mis-sold’, and so you haven’t put me back in the position I would have been had the PPI not been taken, which is what you should have done according to FSA guidelines.

The second issue that in providing the refunds so far, Barclays should have applied these to the balance of the loan, rather than crediting this money to my current account.

Let me explain why this is such a big concern:

My original loan started with a balance of £10,000. I made 7 payments of £242 to the loan, which totalled £1,694.

When I visited the Smithfield branch in 2006 to have the PPI removed, they refunded £1,196.06 – I also received an additional refund of £306.00 as a result of my original complaint to Bryan Ruane in March of that year). So, the total refunded was £1,502. This was credited to my current account, so I couldn’t apply it to the loan balance (as the graduate loan doesn’t allow overpayments).

When the ‘new’ loan was taken out (without PPI) to replace the old one, the new loan balance was £10k. Or, in other words, I’d made 7 payments of £242 towards my loan and – one year later – the balance hasn’t decreased.

Now here’s the really important bit: I believe what Barclays should have done is this:

• Accepted that the PPI was mis-sold, at the time.
• Removed PPI from my loan.
• Noted that I had made 7 payments of £242, and rather than refunding these, they should have applied them to what should have been a starting balance of £10,000 on the original loan. This would have reduced the balance down to £8,273.
• Rather than starting the ‘new’ loan with a balance of £10,000, it should have started with a balance of £8.273 as a result.

This is really very important, because of the way compound interest is calculated on my loan. Because Barclays refunded PPI to my current account – rather than refunding payments to the loan balance – the capital sum of my loan was not reduced. As a result, the interest it incurred and will incur on the lifetime of the loan means that actually I will end up paying more in interest than I will have received through any refund, so actually, Barclays are making more money out of me than they ordinarily would have, just because of the way they have restructured the loan.

Or, in other words, Barclays should have retrospectively applied my 7 payments of £242 to a starting balance of £10k in 2005, which would have given me a balance of £8,273 in 2006 (when the loan was restructured) and would have then given me a balance of £3,457 today.

Instead, my balance today is £5,782 because of the high compound interest created by retaining the high capital figure at the beginning of the loan term, so although I have been refunded £1,502, my loan is actually £2,324 higher than it ‘should’ be. Or, put simply: Barclays have refunded me £1,502 on the one hand, but the way they’ve restructured the loan has then cost me an additional £2,324, so I’m materially down by £1,014 at this point today. By the end of the loan, the amount I’m down will be even greater – and will exceed the £1,502 that Barclays ‘refunded’ to me, so actually Barclays are profiting from the restructure and I am down to the tune of about £2k.

This is completely unacceptable and breaks so many FSA guidelines that I am outraged by the way I’ve been treated. As a result, I am asking that you do the following:

• Review my original complaint in the light of this letter
• Accept that the PPI was mis-sold on my graduate loan and acknowledge this was the reason for my original complaints (in 2006 and in July this year) as stated in my letters.
• Retrospectively re-calculate my loan to place me in the position I should have been in had the PPI not been applied in the first place. As indicated above, I believe this should be around £3.2k approximately (depending on interest and payments over the past month being taken into account).

I appreciate that this is quite a complicated enquiry but it has been dragged on for several months and I want it resolved as a matter of urgency. As a result, I am providing you with 21 days in which to responsd from the date of this letter, before I pass this over to my solicitors. I should advise you that I have also submitted complaints to the FSA and Financial Ombudsman Service and these are pending subject to your forthcoming response.

I look forward to hearing from you shortly.

Yours sincerely,

[Deleted User]

Just thought I'd update you all on this sorry saga:

Received letter from Barclays today (well, I haven't received it yet, but it was read out over the phone by a member of their customer relations team).

It totally misunderstands my letter and ignores all my points.

It states that they didn't change any terms on the new loan (they did: they moved it from 5 to 7 years length).

It states that if I wasn't happy with the way they restructured the PPI, I shouldn't have signed (I was told there was no other alternative way of it being restructured, so I had no choice).

It says the complaint's now closed, but that they've opened a new complaint re: mis-sold PPI (but that's not really what I was complaining about).

Anyway, after speaking to the Customer Relations lady for a good half hour, the penny dropped at her end and she understood what the issue is. She confirmed that the refund should have been made to the loan and not the current account - and she said that the original person dealing with the loan clearly hadn't understood the issues.

So, she reopened the original complaint and closed the new PPI complaint down.

So, I'll continue to wait. In the meantime, I have decided that this is beyond a joke and so I'm going to instruct solicitors to commence an action against Barclays if this isn't resolved within 14 days. They agree that it is a clear case now and if Barclays can't resolve it, I'll just resort to legal redress instead.

melorablack

Why not just go to the FOS before hiring a solicitor - if it turns out the bank is right you would have to pay the legal fees so why not try the free option first?

[Deleted User]

The problem I've got with the FOS is that the timelines are currently looking like 12 - 18 months.

I actually have enough money now to pay the loan off in full - even the arguably incorrect higher balance of £5,700. However, I really don't want to do this (paradodixically) as from some of the experiences on here it becomes much more difficult to claim money back after you've paid it out than it is to claim you shouldn't have to pay money that's yet to be paid - if that makes sense?

If I went down the FOS route (which I already am, incidentally) then I'd have to open a brand new complaint for a refund of the overpayment (which is not what this is about directly) and so I wouldn't see that £2.5k until March 2011, which is more than a bit ridiculous.

At least with a solicitor I can go with a CFA - and those I have spoken to all seem to agree that this is a pretty clear case, especially as Barclays themselves have agreed they've done things incorrectly.

The analogy they gave me was this (it's actually quite nice):

You go into Debenhams and buy a jacket costing £100, but they accidentally charge you £1,000 by mistake.

You ask for your money back and they tell you that they can refund it to you, but only in vouchers, not cash.

So, they are setting out the conditions on which they refund something that was yours all along, in a way that profits them and causes loss to you.

[Deleted User]

A further update for you:

Barclays Retail Banking have escalated this to Head Office in London for them to look at and/or provide their final response, so looking at a further month or two to get a response back and an answer either way.

marshallka

Hope you get the answers you are looking for bunglejemson. No-one could have tried harder.

[Deleted User]

I know! It's ridiculous it's taken this long. I've really lost faith with banks recently...

[Deleted User]

A further update: Barclays Head Office wrote back affirming the previous response and so now it's escalated to the FOS as their final response has been received.

It's so frustrating as I actually now want to pay the loan off in full - but I'd much rather pay the lower amount (which I believe I owe) rather than the higher amount!