PPI Compound Interest & Statutory Interest

pinkmist

I recently joined the forum and have never posted before.  I wonder if I could ask the questions which follow below? I'd really appreciate anyone's thoughts.

Background:  I made a successful PPI claim (on a credit card in 1989-2008). The bank’s offer included a refund of premiums, compound interest and statutory interest, based on their data held 2001+. I asked for a recalculation as I provided prior statements from 1994 – early 2001.  A second offer came through where the compound interest had dropped almost 60%, whilst premiums and statutory interest virtually did not change.  I asked the bank for a breakdown of the calculation as it varied so widely and they did not respond. I feel the change in compound interest is disproportionate to the almost no change in premiums and something is awry.  As an aside, the bank failed to cancel the policy in 2001 after confirming it would do so.

I have placed a complaint with the Financial Ombudsman. They inform they cannot provide a copy of the bank’s calculations as they are commercially sensitive.  I have submitted two redress calculations; i) stripping out the PPI and associated interest to reconstruct my account as if I had never had PPI* and ii) another which computes compound interest and statutory interest apportioned by time to each monthly premium. Both calculations produce a higher redress figure than the bank’s offers.   

1. I wondered, first and foremost, if anybody has a formula for calculating associated interest (i.e. aka compound?) they could share with me to cross check mine simply, or comment on mine?   I adopted:  Account Interest (month) x Total Redress Amount (prior month)/Account Balance (month).  Do you think this is appropriate?
   
   
2. I read that statutory interest is awarded on premiums (& associated interest) at 8% simple interest per year from the time of the policy. Is that correct and is that from the start or the end of the policy probably, up to today’s date? 
   I went about this in (*) by awarding 8% simple interest whenever the reconstructed balance went into credit (1989 -2008) and taking the Total Redress Amount figure (cumulative premiums & associated interest) at the end of the policy (2008) and applying 8% simple interest per year from 2008 to today.   
   
   
3. Do you think there is any value if I choose to state that this policy is not only mis-sold but the bank also overcharged me with no penalty to them in failing to cancel the policy in 2001? I wonder if the Ombudsman/woman takes a specific view if there is also overcharging (i.e. not just mis-selling!) deemed to be going on?  I have provided a copy of the bank’s letter confirming their cancellation of the policy.  Any comments, if this is a relevant point, are most welcome.

I really appreciate any responses to my questions and can’t thank you enough.  I realise I could be getting overwhelmed by this matter and its calculations.   I’d be most obliged for any comments.

Thank you in advance.

[Deleted User]

They will follow the rules set by the regulator, the process is detailed below, they won't rule on over charging, they expect you be put back in a position as if you hadn't had the product which includes refunds of fees, compensatory interest etc
https://www.financial-ombudsman.org.uk/consumers/expect/compensation
If the bank made a mistake in the offer and accidentally put compound when they meant simple, they are allowed to correct that, you can't force them to pay compound

pinkmist

Farfetch, thank you.  On both of their offers they included the 3 elements: premiums, compound interest and statutory interest.  In the second offer, only compound moved by 60%, whilst the others were static.  I cannot get to the difference however much I try.  It doesn't help that I can't obtain even an extract from the bank's calculation (which would aid me).   Separately,  I am keen to receive any generous offers of a formula for associated interest so that I could simply cross check the one I used.  Also a comment if I have tackled the statutory interest appropriately. 

Nearlyold

What are you applying the compound interest to in your calculations? 

pinkmist

Nearlyold, I trust the below is clear? the premiums basically. Total Redress is the running total of premiums + compound interest to date (Total Redress pot). Separately I have a formula which creates the compound interest element for each premium:  Account interest (statement) in the month x Total Redress (in the prior month)/Account Balance. effectively they 'interact' with each other as the compound interest amounts generated are then picked up by the Total Redress formula.  I hope to have set that out clearly. 

Nearlyold

FOS approach to  calculating PPI refunds here:-
How does the ombudsman approach redress where a PPI policy has been mis-sold? (financial-ombudsman.org.uk) Credit Card stuff is towards the end of the doc.
PS you won't get more compo for overcharging when they failed to cancel PPI in 2001, as the PPI redress already covers this anyway.

pinkmist

Thank you Nearlyold.  I will make sure that I read that through thoroughly.  I was wondering if it might give more weight to my arguments in some shape or form in front of the Ombudsman/woman rather than more compensation.  I just feel like I want my arguments to be considered. I realise I have to put everything across in advance of that. 

[Deleted User]

Your argument doesn't have any "weight" in the sense that just because you say you want compound interest or have a spreadsheet, the FOS won't make the bank pay it if they made a mistake and meant to put simple in the calculations.

PPI refunds are a refund of all premiums, 8% SIMPLE interest per year plus anything else they need to refund per the guidelines, you don't get compound interest on PPI refunds (unless the bank is feeling particularly generous)

pinkmist

That gives me a fresher perspective, thank you.  Takes some of the perplexing away.  I think I will make just a few points (a few sentences max-ish) drawing together my thoughts / concerns/acknowledge the last corres, as it now transfers across.  I will then wait for the reply, confident in the knowledge I have duly contributed.  Thanks to you both for providing useful information. 

pinkmist

If anybody had an individual formula though I would still like to receive it. I didn't say that above. Thanks very much.