Really confusing situation: any maths brains out there?

[Deleted User]

marshallka wrote: »

This sounds like they have actually refunded the PPI then. I am totally confused by this complaint to be absolutely honest and just hope someone else comes along to post. I just think that maybe its time for the FOS to look into it for you are you seem to be getting no where with Barclays.

Sorry Marshalka - it is very confusing!

The nub of it is that they have refunded me money, but it's not clear what the refund was for.

The key issue is that they've refunded it in cash rather than crediting it to the loan, and in doing so have kept the capital sum of the loan high thereby attracting a greater sum of compound interest, recouping the 'refund' back quite readily.

[Deleted User]

Here's the latest letter I'm sending to the FOS:

Dear Sir or Madam,

I am writing to initiate a complaint against Barclays Bank PLC regarding the manner in which they have processed and restructured a Graduate Loan product I hold with them, to my significant financial detriment.

At the outset, I would like to stress that although my complaint involves Payment Protection Insurance, it is not a complaint about Payment Protection Insurance, so I would ask that it is not treated with our PPI complaints but it handled like any other ordinary retail banking submission.

I would also like to stress that my complaint is very complicated, so I have set out the facts and events in the order in which they occur. If anything seems unclear, I would be happy to clarify it by telephone.

Summary of my complaint

In removing Payment Protection Insurance from a Graduate Loan I hold with Barclays, the Branch Adviser incorrectly – and against Barclays own standard procedures – credited a refund of PPI to my current account and not to the loan product – which has meant that I have paid a significantly high amount of incremental compound interest above and beyond any refund that was made.

Barclays have recognised that they have made a mistake but are refusing to take action now that I want to close the Graduate Loan.

The facts

April 2005
In April 2005 I approached the end of my degree and owed a reasonable amount of money to my college for tuition fees and course costs. I visited the Sidney Street (Cambridge) branch of Barclays and applied to take out a Graduate Loan for £10,000, which would have enabled me to clear my education debts.

My loan was approved at the rate of 7.9% APR and the capital would be repaid over a 5-year term at a rate of £242 per month.

As the Graduate Loan is a relatively under-used product within Barclays’ product range, few advisers have training on how the applications process works. Consequently, it took several visits to and from the branch to fill in the application forms, but once approved I was notified by telephone and told that the credit agreement and terms would be posted to my home (non-university) address shortly and that the funds would be available for use within 5 working days.

April 2005 – January 2006

Between April 2005 and January 2006 I made 7 payments of £242 towards my loan, having taken a four-month payment ‘holiday’ at the beginning of the loan term.

January 2006

It was not until January 2005 that I received the paperwork for my Graduate Loan and discovered that Payment Protection Insurance had been applied, at a figure of £1,786.69. I did not want, nor even need, PPI – and I believe I was mis-sold it for the following reasons:

·[FONT=&quot] [/FONT]I did not knowingly consent to PPI being added to my loan
·[FONT=&quot] [/FONT]I was not in employment at the time it was added to the loan
·[FONT=&quot] [/FONT]The risks it covered me against were not applicable to a graduate starting their first job
·[FONT=&quot] [/FONT]I already had existing (better) cover through my first job offer and first employment

As indicated previously, however, my complaint specifically about the mis-selling of Payment Protection Insurance – although this is a factor in my larger complaint.

In January 2006, I visited the Three Bridges (Crawley) branch of Barclays Bank to ask that the Payment Protection Insurance was removed from my loan. I was told that the branch was not equipped to handle Graduate Loan enquiries (like many branches in non-University towns) and so I would need to return to the original branch. Given that this was 106 miles away, this was clearly not an appropriate response.

On 16th January 2006, I visited the Smithfield (London) branch of Barclays Bank as this was the closest branch to where I worked. I asked that the PPI was removed from my loan and was told by the branch manager that this is something they could do, although they had never handled a Graduate Loan enquiry before and none of their staff have received any training on it (being located, you will understand, in the City of London).

At the time, I dealt with a branch adviser named Sonia Irfan who was incredibly rude, slow and constantly made mistakes with my enquiry. She had never dealt with a Graduate Loan product before and so every action she took was made in contact by telephone with Barclays Student Team who advised her on how to remove PPI from my loan. In summary:

·[FONT=&quot] [/FONT]Sonia required me to visit the Smithfield branch around five times over the course of several weeks in order to complete forms that should have taken around 20 minutes to fill in all at once
·[FONT=&quot] [/FONT]I was repeatedly given incorrect information about how the PPI would be removed
·[FONT=&quot] [/FONT]The ‘restructuring’ process tooks months to complete, even though Barclays advertise it as being a smooth and quick process

At the time, I made a complaint about her mistakes and delays, which ended up being escalated quite high up within Barclays’ Customer Relations team, to a manager by the name of Bryan Ruane. I have enclosed a copy of the original correspondence to this complaint. My complaint was upheld and an apology issued for the bank’s mistakes.

March 2006

In order to remove the Payment Protection Insurance on my loan, I was told by Sonia Irfan that I would need to take out a new Graduate Loan, without PPI. This would then ‘repay’ the outstanding balance of the old graduate loan – and Barclays would then ‘write off’ the difference (which would represent the PPI premium I no longer wanted).

On 18th March 2006 – over two months after I first visited the branch to ask them to remove PPI – the new Graduate Loan took effect.

What happened next forms the crux of my complaint.

When the new loan took started, the capital sum of the loan was £10,000, which was the same starting figure as the original loan.

I received a refund of £1,196.06 to my current account. This was – I was told – a refund of PPI premiums paid so far (up until January 2006)

I received a further refund of £306.00 as a ‘gesture of goodwill’ following my complaint about Sonia Irfan. I was informed by Bryan Ruane (see attached correspondence) that this represented the PPI premiums I had paid between January 2006 and March 2006 (i.e. owing to the bank’s delay I had paid PPI for these months when I shouldn’t have had to, so this is what was refunded here).

So, by 18th March 2006, I had paid £1,694 towards my graduate loan, but the balance was now the same as it started one year previously. I had been refunded a total of £1,502, direct to my current account.

Additionally, the term of the loan was increased from 5 years to 7 years.

Overall, therefore, I was materially worse off by £192 – although this is not the cause for my complaint.

The issue

It is only recently that I have had the opportunity to look back in detail at how Barclays acted when they removed the PPI from my loan. I was prompted to do this following research using MoneySavingExpert.com and by using the MoneyMadeClear website alongside other FSA resources.

I believe – and Barclays have admitted – that the bank acted incorrectly in the way that they removed the PPI from my loan and it is only now that I am seeing the consequences of this: namely, that I am losing out to the tune of several thousand pounds.

When I asked for PPI to be removed from my loan, the bank should have placed me in the position I would have been in had the PPI not been taken in the first instance. Additionally, in removing the PPI from the loan, they have an obligation under FSA guidelines to ensure that the customer is not placed in a situation after the PPI has been removed that is materially disadvantageous had they not had the PPI removed.

Throughout the above, the bank is under an obligation to act fairly.

As you will note above, I had made 7 payments of £242 towards my graduate loan, representing £1,694 total.

My first complaint is that Barclays should not have required me to take out a new loan in order to remove PPI. I was told that ‘this is how it has to be done’ and offered no choice as to how the PPI is removed.
My second complaint relates to how the new loan took effect. As noted above, I received a refund of £1,502 direct to my current account, whereas what should have happened is this sum should have been applied direct to the loan balance, reducing it (e.g. the payments I’ve made so far should be applied to the capital sum in order to place me in the same position as if the PPI had not been applied – as explained previously).

This is of huge significance because of the terms and conditions of my Graduate Loan. Like most loan products, I am unable to make ‘overpayments’ towards this, so could not apply the cash refund to my loan to reduce the balance. As I have stressed, normally this would be done automatically by the bank – and Barclays’ own correspondence acknowledges this. But in refunding me cash by mistake, I haven’t been able to put that refund towards the loan balance.

At the time I was not given the opportunity to challenge this because the restructuring of the loan took place whilst I was away from the branch. I did query the new loan figure with the Banking Adviser (Sonia Irfan) but was told firmly that ‘this is just how it is done’ and that there is no alternative way of removing PPI. I was also told that as the original loan had been ‘paid off’, I was under an obligation to sign the new loan otherwise I will be in breach of the original credit agreement. Again, let me stress: all of the restructuring took place once I had authorised Barclays to remove the PPI and I was not present when all of this passed through into my current account.

The issue is significant because of the way that compound interest is calculated on my loan:

In April 2005 I started off with £10,000 as the loan balance, onto which an unwanted PPI premium was added.

I made £1,694 worth of payments on this loan. Barclays then refunded me £1,502 (and please note that I had no option to query/decline this payment as it was made direct to my account without it even being explained to me as to what it was for).

In May 2006 (when the new non-PPI loan took effect), the bank had reset the total back to £10,000, rather than applying the refund to the original (outstanding) loan balance, which would have reduced the capital sum down to £8,220 (approximately – I believe the actual total should be around £8,273 if my calculations are correct). The bank also extended the term of the new loan from 5 to 7 years and I was told again that ‘this is just how it’s done’ and that ‘if I want to change the term back to 5 years I can pop into any branch and this can be done in a few minutes easily’.

So, the new loan is approximately £1,780 higher than it should have been and although I have ‘received the benefit’ (Barclays’ words) of a £1,502 refund (which is still short of the £1,694 repayments I had made), I could not apply this to reduce the capital balance of the new loan, meaning I am attracting compound interest on the additional £1,780 that I should not be paying.

The loss I have suffered

I appreciate that my complaint is complicated and difficult to get one’s head around, so here is a breakdown of the mathematics to show why I have suffered. Situation A reflects what actually happened in practice with the way in which Barclays restructured my Graduate Loan. Situation B demonstrates what should have happened – as Barclays themselves acknowledge – allowing you to see the financial difference between them both.

Situation A: what actually happened
·[FONT=&quot] [/FONT]Starting balance of loan = £10,000
·[FONT=&quot] [/FONT]PPI added (£1,789.69) = total capital sum of £11,789.69 attracting interest @ 7.9%
·[FONT=&quot] [/FONT]7 payments of £242 made towards loan
·[FONT=&quot] [/FONT]Refund of £1,502 made to current account
·[FONT=&quot] [/FONT]New loan started for £10,000 @ 7.9% over 7 years

In this situation, the balance of the loan as of 14th December (today) is £5,473.79 and the loan will be repaid by June 2010.

Situation B: what should have happened (assuming new loan needed to be taken out)

·[FONT=&quot] [/FONT]Starting balance of loan = £10,000
·[FONT=&quot] [/FONT]PPI added (£1,789.69) = total capital sum of £11,789.69 attracting interest @ 7.9%
·[FONT=&quot] [/FONT]7 payments of £242 made towards loan
·[FONT=&quot] [/FONT]PPI removed from loan balance
·[FONT=&quot] [/FONT]Refund of payments + premiums made to original loan balance of £10,000, reducing it to £8,273
·[FONT=&quot] [/FONT]New loan started for £8,273 @ 7.9% over 7 years (although should actually be for 5 years).

In this situation, the balance of the loan as of 14th December (today) should be £3,389 and the loan will be repaid by June 2013.

So, as you can see, my loan balance should really be £2,084.79 lower today had Barclays processed the PPI refund correctly. As I have already received an incorrect cash refund of £1,502 – which I couldn’t apply to my loan balance to reduce it – I have lost a further £582.79 to this point today and by the end of the loan term (2012) the amount of compound interest I will have paid will outweigh the total of any refund (£1,502) issued by the bank.

Or, to use an easily-understandable analogy to explain what has gone wrong: it’s as if I went into a shop to buy an item costing £100 and was accidentally charged £200 on my card because of a mistake by the cashier. Rather than giving a refund, the customer is told that they can only receive their money back in the form of vouchers, so the shop profits to the expense of the customer, even though it was not their mistake.

Barclays dictated the terms of the PPI removal and actually got this bit wrong – even against their own standard Graduate Loan procedures. Because of their mistake I am left with an artificially high capital sum on my loan which I cannot reduce and Barclays are making increased compound interest from their mistake.

Importantly, I now have enough money to pay off my graduate loan but cannot do so until this complaint is resolved.

The complaint process with Barclays

As indicated previously, an original complaint was made and upheld in 2006 by Bryan Ruane, a Customer Relations Manager. This complaint settled on the level of service received from Sonia Irfan at the Smithfield Branch and the errors and delays made in removing PPI from my Graduate Loan product.

My recent complaint was made on 26th July 2009 when I spoke with Manisha Patel, one of Bryan Ruane’s colleagues. The complaint was only logged on Barclays’ system in August.

Since then, I have sent approximately five letters to and from the bank to ask them to look into my complaint but every response I have received either misses the point or fails to address my enquiry.

According to my phone records, I have spent over four hours on the telephone to Barclays in the past six months trying to resolve this and/or explain the problem to them, but no-one seemed to understand.

I have taken four days off work in order to deal with correspondence to the bank, even having to visit six branches myself to speak with Personal Bankers, all of whom have agreed with me that the way Barclays restructured my loan was incorrect.

Barclays have now provided their final response in which they have acknowledged they restructured my loan incorrectly, but refusing to take any action on the matter.

I have been advised by the bank that the refund of payments to my current account signalled the end of the matter – and that as I have ‘received the benefit of the funds’ that there are not going to investigate further. As I have explained however:

·[FONT=&quot] [/FONT]I had no choice but to accept the funds as they were transferred to my account without my knowledge.
·[FONT=&quot] [/FONT]I did not want the funds transferred to my bank account: it should have been used to reduce the loan balance.
·[FONT=&quot] [/FONT]I was given no option but to sign the new loan agreement as I was told ‘this is standard procedure’ when restructuring a graduate loan to remove PPI and was not made aware of how the loan restructure would work (as this is not detailed in the loan agreement).
·[FONT=&quot] [/FONT]I did not ‘receive the benefit of the funds’ as I was prevented from applying this money towards my loan balance; my hands were tied by the bank as to how to use the refund, all helping their profit on the product
·[FONT=&quot] [/FONT]I was given incorrect information as to the term of the new agreement, being advised that I could reduce the term from 7 to 5 years ‘easily’ (actually, I can’t – unless I take a new loan out)
·[FONT=&quot] [/FONT]I still haven’t received a full refund of the PPI and premiums I have paid
·[FONT=&quot] [/FONT]The bank still haven’t address specifically the issue of PPI mis-selling in my original complaints – and keep ignoring this aspect of my letter
·[FONT=&quot] [/FONT]The bank took from 26th July to 31st October to issue a response to my complaint, which is 13 weeks and vastly longer than the 8 week deadline provided for by the FSA. It took a further 6 weeks to receive their final response.
·[FONT=&quot] [/FONT]At the present rate my loan will not be paid off until June 2013, which is 3 years later than it would have been paid off under the original agreement.
·[FONT=&quot] [/FONT]Barclays will receive substantial compound interest by keeping the capital sum of the loan high.

I have attached copies of all the correspondence between the bank so far – and I would like to escalate this for your urgent attention.

[Deleted User]

An update on this sorry saga:

Barclays wrote back under a separate complaint number to uphold the mis-selling of the PPI and have refunded me £700+ on top of the £1,502 I already received in 2006. However, they've refunded it AGAIN to my Current Account which is exactly what my other complaint (above) is regarding! So, I can't use the refund to reduce the loan balance.

So, the original complaint remains with the FOS and this now just complicates it.

marshallka

Deleted_User wrote: »

An update on this sorry saga:

Barclays wrote back under a separate complaint number to uphold the mis-selling of the PPI and have refunded me £700+ on top of the £1,502 I already received in 2006. However, they've refunded it AGAIN to my Current Account which is exactly what my other complaint (above) is regarding! So, I can't use the refund to reduce the loan balance.

So, the original complaint remains with the FOS and this now just complicates it.

Blimey, what are they doing bunglejemson. I hope you have informed FOS of this too and I am sure they will take it all into consideration when they adjudicate.

Good luck

[Deleted User]

Yes, I've informed FOS but still waiting there. Ridiculous as I want to pay the loan off now but can only afford the lesser amount not the full one.

[Deleted User]

Just to update you that this sorry saga is still ongoing. The FOS and Barclays seem to be getting their wires crossed and apparently I've been offered a settlement, although Barclays know nothing about it.

marshallka

Deleted_User wrote: »

Just to update you that this sorry saga is still ongoing. The FOS and Barclays seem to be getting their wires crossed and apparently I've been offered a settlement, although Barclays know nothing about it.

If FOS have told you this then perhaps they have spoken to another department to the ones you have spoken too. I would ask that FOS confirm your settlement in writing and let you know the name of the person who offered it perhaps.

Good luck