PPI compensation on credit cards

snecklifter

Hello,

Could someone in the know please explain the following scenario?

On credit card redress, why would you get an additional amount of compensation for miss-sold PPI on a closed account over an account that is still 'open' - even if the account has had a zero balance for several years?

Having looked on the FOS website of the ombudsman decisions, where closed accounts have been upheld, there is always an additional 8% compensation award, but I'm not finding out any information anywhere detailing why this should be the case?

I kind of understand why you would not get an additional 8% on top of normal redress for cards with a loaded balance, but am not getting the reason(s) why on a card that has been 'dormant' for several years?

Many thanks in advance for any sound replies?

[Deleted User]

Full redress is a refund of all PPI paid, plus associated interest plus 8% simple interest. It makes no difference whether the card is dormant, live or closed. It's the same formula for loans and mortgages.

snecklifter

Sorry, but I don't think I got my initial query across clearly.

I have noticed on the FOS website within their database of case decisions on credit card ppi complaints that where they uphold in the customer's favour, you get the 'across the board' redress which generally goes like:

Mrs X should be put back in the position she would have been in now if she had taken out the credit card without the PPI policy. So the Bank should:

A. Carry out a hypothetical reconstruction of the credit card account to find out what the closing balance of the credit card account would have been if Mrs X had paid the samemonthly payments, but the PPI policy had not been added to it.

This will involve the Bank removing the PPI premiums, any interest that was charged on the premiums and any charges (and interest on those charges) that would not have applied if the PPI had not been added to the account.

The Bank should then pay Mrs X the difference between the closing balance and what the closing balance would have been without PPI.

B. Pay Mrs X interest at 8% per year simple† on any credit balance for any periods when the reconstructed account would have been in credit for the period it would have been incredit.

However, if the account is found to have been closed down, there seems to be an additional award of compensation, which is generally worded as follows:


C. Pay Mrs X interest at 8% per year simple† on the difference between the actual closing balance of her account and the reconstructed closing balance from the date the account closed to the date of settlement.

D. Set out in writing to Mrs X how it has calculated the compensation in A, B and C.

So what I would like to understand is why is a closed cerdit card account awarded an additional redress of interest [as per step C above] but not an account that is still open with a zero balance that has been idle for a number of years with a zero balance all along?

Much obliged for any answers on this subject.

snecklifter

Just double checking that any of you advisers out there may have an answer to my query as this has now dropped down the 'charts' so to speak

This has no bearing on any personal circumstances but I would like to be educated and understand the process.

Many thanks for any sound reply.

Insider101

To try and explain it as simply as I can.

What they do is basically take what you have paid for your PPI away from your credit card balance at any one time. Then work out what your balance would have been without the accumulated cost of PPI.

If your balance is £2,000 and the total cost of PPI is £1,000 then you'd still have owed £1,000 even without the PPI. Hence you have not been deprived of the use of your own money, you've just used more of your available credit. Hence you don't get statutory interest.

Now say if you paid off the £2k balance and closed the account. If it hasn't been for paying the PPI you'd have a grand of your own money on your pocket. So you're entitled to simple interest at 8% per annum on the money you would have had for that length of time.

snecklifter

Thank you Insider101 for your reply. You have certainly answered my question in part and what you have said makes sense.

What I am not understanding is why you would get this redress on a closed account and not, by all accounts, on an open account that has had no transactions and a zero balance since the miss selling of ppi came to light.

I can understand an account with an active balance, but am not getting it when it comes to, for want of a better word, an idle' account?

Anyone out there with a 'legal' answer to this scenario?

[Deleted User]

snecklifter wrote: »

Anyone out there with a 'legal' answer to this scenario?

PPI redress is not a legal issue, no laws have been broken.

snecklifter

Sorry, I stand corrected.

Anyone out there with a 'rational' answer to this scenario?

snecklifter

Just pushing this up the ladder again - a bit surprised that no one has provided an answer but it seems to be not a run of the mill question! [hence no replies?]

I know this is something which has not been asked or brought up in the multitude of entries on PPI [from what I have been able to see], but when you look on the FOS website on their ombudsman case decisions, it is quite a common scenario.

In a nutshell, why would you be offered an additional 8% on a closed credit card account over an account that has being idle with a zero balance over a number of years. I am not understanding the differance [but understand why if the card had an outstanding balance on it]. I just don't see it. Can anyone explain why?

-taff

Post 5.....
or you could do the sensible thing and phone the ombudsman with your query....