Cancelling payment protection insurance..

AnnOyed

Took out a LloydsTSB loan 15 months ago. I queried the ppi but was told I could cancel at any time so accepted it. I'm taking a pay cut in January so have tried to cancel it but i'm not happy with proceedings. I've been given conflicting information and being told it's recalculated in ways i'm not happy with. Roughly speaking the monthly payment is £400. £300 cash loan + £100 ppi. I thought cancelling the ppi would make the monthly payment £300 a month but apparently not. What theyre saying is a larger % of the £400 monthly payment is going towards the ppi rather than the loan so if i cancel the loan is recalculated to £343 a month! I suppose a bit like decreasing term life assurance but I find nothing abou that in my agreement. Looking at my agreement it says:
"1.4 If you choose to purchase the LPI, we will pay any LPI loan directly to the insurer to cover the price of the premium. If you decide to cancel the LPI policy the LPI loan will be cancelled. The cash loan will continue and we will collect only the monthly repayment for the cash loan."
Now, my interpretation of that is there's no recalculations, no rebates, no reference to any other information to which i've seen or been told about. I'm arguing that if it's not in the agreement or referred to in the agreement then it's not valid! Is it worth me pursuing this?! All I want to do is knock the LPI off!!

confused76

yep, that's exactly what happened to me with natwest....apparently a greater proportion of ppi is paid at the start of the loan term...it's highly annoying!

AnnOyed

On the basis that it wasn't mentioned when I applied for the loan (in branch, face to face, I said I may cancel but nothing was explained at the time) and there's nothing in my agreement that about the methods used then I think I have grounds to take it further. If I signed for it and it's there in black and white then fair enough but there's nothing!!

AnnOyed

Just read elsewhere, apparently it's Rule 78, some banks do it, some don't. It's a shame there was no mention in my agreement!

jonesMUFCforever

AnnOyed wrote: »

On the basis that it wasn't mentioned when I applied for the loan (in branch, face to face, I said I may cancel but nothing was explained at the time) and there's nothing in my agreement that about the methods used then I think I have grounds to take it further. If I signed for it and it's there in black and white then fair enough but there's nothing!!

Did you ask the specific question though?
The answer would have been on the consumer credit act paperwork which you signed when the loan was taken out.

AnnOyed

I did ask if I could cancel and was told yes, although it wasn't explained how it would cancel and the cash loan be recalculated. All I can refer to is my terms of agreement and there's no mention in there either.
" If you decide to cancel the LPI policy the LPI loan will be cancelled. The cash loan will continue and we will collect only the monthly repayment for the cash loan"
My interpretation is that my agreement clearly states my monthly cash loan payment is £300 and the wording above says it will continue. I've been told that the loan needs to be cancelled and recalculated. That contradicts the above and if the bank are correct then why isn't this refelected in my writing in my agreement?

halifax71

Ignore Jones, he thinks people should know all the intricate details and that customers have no recourse when it appears that banks have taken advantage of your lack of knowledge. That is not the case. Your terms seems quite clear, and if they actually don't mean that, then they are unclear and ambiguous.

It sounds like your PPI premium was paid in full to the insurance co, e.g. £10000. It was probably only valid for a fixed term (please check but it is common for these to be for 5 years only) but you will have been paying for it over the full term of your loan (again please check). You're probably now paying for x% of the policy (e.g 3 of the 5 years it covered before you cancelled) over the remainder of your loan.

For example, if the PPI was £10000 and it did in fact only cover you for 5 years, and you cancelled after 3 years then you've used £6000 worth of the policy. You will not have paid £6000 yet, e.g 3 years @ £100 p/m = £3,600 so you still owe £2400.

This is not taking into account the interest that the £10000 policy has accrued, meaning that probably only £1000 of the £3600 paid would have been paid off the PPI Capital, therefore there would be £5000 still owing despite you using £6000 worth of the policy and paying £3600 towards that cost. Hope that makes sense.

I would ask yourself whether the PPI was actually of benefit to you, e.g. did you have pre existing employment cover, did the policy just cover your payments for 12 months i.e. in line with employment cover, was the cover advised as mandatory etc etc.

Most of these front loaded policies were mis-sold - 9 out of 10 currently.

Good luck - but please do not take banks at their word. Question everything.

AnnOyed

The bottom line is I want to cancel the LPI and continue the cash loan. That's what I was led to believe when I took it out and that's what my agreement says I can do. I don't want to cancel the cash loan, only the LPI but LLoydsTSB says I have to cancel both and take out another loan! In that case, i'm not 'continuing' my cash loan as per the agreement so at that point they've welched on the agreement?
I've read on another forum of someone successfully cancelling and getting a refund and also a mention of another getting the whole loan written off so there's hope!! There's going to be some burning ears tomorrow that's for sure....

jonesMUFCforever

Shame they will be probably be yours.
Sorry Halifax if you can't read take an adult with you before you sign anything.

marshallka

AnnOyed wrote: »

Just read elsewhere, apparently it's Rule 78, some banks do it, some don't. It's a shame there was no mention in my agreement!

Rule 78 won't be used on a loan taken out 15 months ago as it was abolished on "new" loans taken since 2005.

marshallka

AnnOyed, I would take this over to the PPI reclaiming threads. You may get a better response and more help over there.
http://forums.moneysavingexpert.com/forumdisplay.html?f=169