Loan Protection money not used for purpose

bergkamp1966

Hi All

Can anyone tell me can a bank use loan protection money to eat up their excessive charges instead of paying off the loan.

I took out a loan with loan protection, had accident at work and was off for ten months. the loan protection dept paid the money into my account, (payments were paid in very irregularly)

Nine payments were paid into bank and bank only used 5 of these payments against the loan the rest were used to eat up their bank charges.

I took the loan protection for peace of mind and as the agreement states it would be used to pay off the loan if i was sick, made redundant etc, there was no mention that the bank could use it for other means.

I would greatly appreciate any advise on this.

Many thanks in anticipation

pink_phantom

Same happened to my brother. Took out insurance with lloyds but they were so erratic paying. They still honoured the dd though but charge him loads for it. gggrrrrr

bergkamp1966

At least they honoured his DD i hope he is claiming all his excessive charges back. Has he been on the CAG website it is full of amazing stories of people caiming back their charges.

I have put in a Customer Complaint but am trying to find out if the bank is allowed to do what they did as I feel that they aren't.

Not having much luck in finding out the answer yet.

bergkamp1966

I have searched the internet to try and find an answer to my problem, still no joy so I have emailed the FSA and OFT hopefully someone will know.

I hope to get an answer before I write to the top man of the bank.

If anyone outthere knows the answer PLEASE PLEASE PLEASE let me know.

Thank you for reading

pink_phantom

It is annoying because his loan was with lloyds and he had a nasty accident and was made sick while waiting for an op but lloyds still charged him o/d fees for honouring their won dd! crazy. they did pay up in the end for the insurance but not before he had loads of fees. It is not right because he WAS responsible and he WAS covered.

Astaroth

The insurance company makes payments to the loan. These typically follow normal payment rules so if you had been making the payments and these had had to go against the bank charges first (as is common practice) then so would the insurance payments in the same that with a credit card (assuming no charges) the payments would go against the outstanding monies with the lowest interest first

bergkamp1966

Astaroth

Thank you for that information, however i am still confused as some of the months they paid the DD even though i was overdrawn and the other times they just used it for their charges even though i was only a bit overdrawn, they seem to have paid the DD when i was more overdrawn.

I took the loan protection out in good faith that it would pay for my loan and loan only if ever i was sick.

I had a serious accident at work and had to use it, at this time i split form my partner and have only just started receiving bank statements even though they had my new address since last year.

I thought the title of the service that i bought was Loan Protection Insurance and feel that no matter what state my account was in that it would be used for the purpose that i paid for as it did say for peace of mind if off sick, redundant etc, how wrong was I........

Astaroth

Obviously I cant explain the inconsistancies of what they were doing but in more normal applications of PPI the policy protects the "account" which includes fees/ loan/ interest/ PPI installments etc - though the max they will payout will not include any fees you incured through prior late payments etc.

Given that fees will normally attract the same interest as the loan, will have to be paid etc I dont see why you have an issue on which part of the loan account the money has been used against unless they were charging subsequent fees for the PPI protection not paying enough?

bergkamp1966

Thankyou

I took out the loan with with loan protection, the loan protection department paid the correct amount that would cover the whole of my loan's monthly payments whilst i was off sick (even though they were not paid on the right date). This money was to be used solely to pay against the loan as informed by the bank when they sold it to me. This did not happen.

It is very complicated and i do thankyou for all your advise. It wouldn't have been so bad but the account was only left open to cover the loan repayments. I am still waiting for them to sort out how i am to repay them. My local branch have been great but they keep hitting their heads against a brick wall whilst trying to sort it out on my behalf, hopefully it will be sorted soon.....

bergkamp1966

Just a quick update the Customer Relations Unit are now finally looking into my complaint so hopefuly will find out what they are going to do to rectify the issue.

I will keep you all updated

jonesMUFCforever

The only way this would have worked is if you had opened a second account just to pay your loan d/d.
You may still have been charged initially for the lack of funds whilst your claim was being processed but at least it would have been easier to sort out after.