Can I reclaim loan protection cost

edncharl

A couple of years back I had a graduate loan with HSBC, and stupidly took out the loan protection. The cost of which was added to the borrowed amount from the off which was about £6000. I think the protection sceme was worked out at about £1250 on top.(so about £7250 total). About 6 months into the loan I was off work following a car accident and was advised by the bank to reclaim my loan repayments on the protection sceme as it covered me for this eventuality. I was only off work for a period of 8 weeks and only had approximately one and a half payments that I could claim. This amounted to roughly £300.
My financial circumstances changed about 6 months later and I needed to borrow more money. I again went to HSBC and effectively took out a further loan, to settle the existing one and also to cover my new needs.
The settlement figure that I was at first quoted was about £4700, until they said "oh you've made a claim using your payment protection". They then recalculated the settlement to something like £5700. Stating that because I had made a claim I had to pay the full 5 years term on the loan protection, despite only claiming a measley £300, and also despite ending the loan early (and therefore the protection was no longer needed for the remaining 3 years out of the 5). I then requested that the protection be transferred to my new loan to cover me for it -seeing as I now had to pay the full protection amount, they said sorry we can't do that as it's not transferable to other loans.
So in effect I had paid for 5 years of loan protection (up front) and only received 2 years of cover.
I did complain at the time and was promptly advised that this was covered in the terms and conditions of my loan agreement (yes I know the small print).
My question is; Am I entitled to reclaim this charge? And if so, how shall I go about it?
Many thanks

MarkyMarkD

Welcome to MSE and thanks for asking an interesting question!

Most loan protection insurance is "single premium", meaning that the premium is charged up front and added to your loan. If you cancel the loan early, then you get some sort of rebate on the unused proportion of the insurance (which isn't necessarily pro-rata, as the risk is higher at the start of the loan not least because the balance is higher).

I can understand that you don't get a rebate if you have claimed. That's no different to (say) car insurance - you can never get a rebate for a part year's cover if you've claimed there either.

So, the issue is not that you couldn't get a refund in the first place - you paid for the insurance, the insurance was valid (albeit that it was probably quite expensive) and you in fact claimed on it.

The real issue is that you then compounded the problem by settling the first loan and taking out a new one.

You didn't have to do this. You could have taken a separate loan elsewhere for the "top up" amount.

They even told you, before you agreed to the new loan deal, that you would effectively be wasting the outstanding cover on the existing loan. And you agreed to go ahead.

I cannot see any case for reclaiming anything here. You bought cover which you were eligible to buy; you claimed on it successfully; they told you that by settling the loan you would lose the remaining cover; you agreed to do so.

They didn't mis-sell anything.

Sorry that isn't the answer you want to hear. But you can't claim mis-selling unless you have been mis-sold to.

ccastley

I've seen a lot of the bank charge reclaiming 'charge to use' sites offering to also recoup your PPI charges on Credit cards, etc.

Does anyone know how to go about this?

MarkyMarkD

IMHO it centres on whether the cover was mis-sold. If, for example, you are self-employed or employed on a fixed term contract, you are probably ineligible for most of the benefits of PPI. If the lender didn't check that you were not in one of these categories, then arguably they mis-sold you the PPI and you can ask them to refund the premiums on the basis of mis-selling (and threaten to take them to the FOS if they fail to do so).