PPI Reclaiming discussion Part III

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Comments

  • di3004
    di3004 Posts: 42,579 Forumite
    Alibear wrote: »
    Just left my response on the successes forum. Both HSBC and Abbey have upheld my complaints! Just waiting to hear back from my other Abbey loan but that should be upheld, seeing as I'm claiming under the same circumstances as the other loans. So happy! Thanks so much for everyone's help and encouragement.

    Ali. x


    Wow fantastic news Alibear :beer: :T :j , well done !:D :T :beer: .

    Di
    xx
    The one and only "Dizzy Di" :D
  • GIOL_Elmo
    GIOL_Elmo Posts: 54 Forumite
    Hi all, I've never been on this thread before but since I have just finished up with a bank and have been involved in a number of ways with PPI I am going to try and share some of my knowledge with everyone in the hope that some people can find some justice.

    I believe PPI is a very very poor product and knowing the details of it has re-inforced this belief. What is covered/excluded in these policies can be crazy but the most shocking facts are the way it is looked upon inside the banks and the way in which banks operated in the personal loans market and their reliance on PPI.

    I am happy to pass on any info I can to help but I will not be disclosing who I worked for in public as the roles within the banking sector I worked in are very close knit and I wouldn't like people knowing who I am, but I will say I worked within risk and was involved in profitability modelling, scorecard development and other things like that.

    If anyone has any questions it would be great if you could put my username in it as I will be doing a search on that and trying to answer all that I can.

    So here is some information you might not previously have known about the way banks worked in terms of PPI and their reliance on it etc.

    You take out a loan and they sell you PPI on top of the loan, these are some theoretical numbers I have pulled from best buy tables at the moment but to bo honest the numbers were higher a few years ago. I have used an average loan of £10,000 and term of 60 months. Here is what banks do not want people to know!!!

    Loan - £10,000
    Term - 60 months
    Rate - 8.7%
    Interest Payable - £2,273

    Once you take into account cost of funding (somewhere around 6%) and bad debts for a campaign like this depending on scorecard cut-offs will be around 2%. This varies with how extreme rate for risk is being applied etc selling these loans will be breaking even or making a 1% - 2% margin. Now for PPI.

    Capital for PPI - £2,074
    Interest for PPI - £1,278

    For this you need to need to allow for funding the PPI capital but the cost of maintaining a PPI product is somewhere between 40% and 50% so this loan without PPI will break even roughly and sold with PPI will make around £1,600 which is all profit!!!

    So the 40% - 50% of the PPI payments get put into a big pot and from there any claims get paid, any refunds from cancelling the policy and early repayment of the loan gets paid and bad debts from customers not paying back, and then if there is some left the company gets another nice little profit share on a yearly basis.

    As I said above for accounts taking PPI you get somewhere in the region of a 16% return on capital which is not a bad margin and allowing for roughly 1 in 3 taking PPI means you can essentially create a 5% margin on your entire book by selling loans that make no money.

    This is a reasonably common business model to sell loans which on their own are break even and then sell PPI which on average will be sold at somewhere around 30% penetration you have a successful business model and one that banks are going to fight all day.

    Things were even worse about 3 years ago when loans were available at sub 6% and cost of funding them was over 6%!!!

    Hope some of this helps and as I said any questions just let me know.
    The truth behind the PPI numbers...(Post 3712 on the PPI Reclaim thread 3)
    http://forums.moneysavingexpert.com/showpost.html?p=16347785&postcount=3712
  • di3004
    di3004 Posts: 42,579 Forumite
    GIOL_Elmo wrote: »
    Hi all, I've never been on this thread before but since I have just finished up with a bank and have been involved in a number of ways with PPI I am going to try and share some of my knowledge with everyone in the hope that some people can find some justice.

    I believe PPI is a very very poor product and knowing the details of it has re-inforced this belief. What is covered/excluded in these policies can be crazy but the most shocking facts are the way it is looked upon inside the banks and the way in which banks operated in the personal loans market and their reliance on PPI.

    I am happy to pass on any info I can to help but I will not be disclosing who I worked for in public as the roles within the banking sector I worked in are very close knit and I wouldn't like people knowing who I am, but I will say I worked within risk and was involved in profitability modelling, scorecard development and other things like that.

    If anyone has any questions it would be great if you could put my username in it as I will be doing a search on that and trying to answer all that I can.

    So here is some information you might not previously have known about the way banks worked in terms of PPI and their reliance on it etc.

    You take out a loan and they sell you PPI on top of the loan, these are some theoretical numbers I have pulled from best buy tables at the moment but to bo honest the numbers were higher a few years ago. I have used an average loan of £10,000 and term of 60 months. Here is what banks do not want people to know!!!

    Loan - £10,000
    Term - 60 months
    Rate - 8.7%
    Interest Payable - £2,273

    Once you take into account cost of funding (somewhere around 6%) and bad debts for a campaign like this depending on scorecard cut-offs will be around 2%. This varies with how extreme rate for risk is being applied etc selling these loans will be breaking even or making a 1% - 2% margin. Now for PPI.

    Capital for PPI - £2,074
    Interest for PPI - £1,278

    For this you need to need to allow for funding the PPI capital but the cost of maintaining a PPI product is somewhere between 40% and 50% so this loan without PPI will break even roughly and sold with PPI will make around £1,600 which is all profit!!!

    So the 40% - 50% of the PPI payments get put into a big pot and from there any claims get paid, any refunds from cancelling the policy and early repayment of the loan gets paid and bad debts from customers not paying back, and then if there is some left the company gets another nice little profit share on a yearly basis.

    As I said above for accounts taking PPI you get somewhere in the region of a 16% return on capital which is not a bad margin and allowing for roughly 1 in 3 taking PPI means you can essentially create a 5% margin on your entire book by selling loans that make no money.

    This is a reasonably common business model to sell loans which on their own are break even and then sell PPI which on average will be sold at somewhere around 30% penetration you have a successful business model and one that banks are going to fight all day.

    Things were even worse about 3 years ago when loans were available at sub 6% and cost of funding them was over 6%!!!

    Hope some of this helps and as I said any questions just let me know.


    Hello there hun
    Thank you so much for coming over at this forum.:T

    Your input like I said the other day will be a great help to all here, so I was also wondering if and when you have time is to have a look through these threads and maybe give a little feedback if you feel you can also help in these areas?;)
    Some are unable to go to the FOS due to non-regulation of loan companies of when the loans were taken out etc.

    Thank you so much for adding the above information also, we appreciate this very much.:T :beer:

    Di
    x
    The one and only "Dizzy Di" :D
  • GIOL_Elmo
    GIOL_Elmo Posts: 54 Forumite
    Hi Di3004 I am intending on having a decent read through what I can and adding some help where and when but if I could never manage to get through all of it, if there are any key points you would like answers drop some of them and I'll answer what I can off the cuff.

    I also have some interesting info on the bank charges thing which would blow the whole thing apart if I had any documented proof of it but alas I only have what I have been told but what I would say is that a lot of work was done to create a true cost of missed payments and including everything that could be included came to about £2 which was calculated by one of the big accounts (KPMG or Deloitte or someone) that was something they certainly do not want to get into the open!!!
    The truth behind the PPI numbers...(Post 3712 on the PPI Reclaim thread 3)
    http://forums.moneysavingexpert.com/showpost.html?p=16347785&postcount=3712
  • pinknico
    pinknico Posts: 3,261 Forumite
    yraunaj wrote: »
    Yes they have said they dont agree we were mis sold the policies the last letter from them was Feb 2008, so think i will send them another letter and if no luck approach the FO.

    Yes things have changed a lot since Feb. so its worth a try.Also I think a move to Germany is a good reason why you have not contacted the FOS yet.
    DS1 12/10/04
    DS2 13/07/06
    DD1 06/12/07
  • di3004
    di3004 Posts: 42,579 Forumite
    GIOL_Elmo wrote: »
    Hi Di3004 I am intending on having a decent read through what I can and adding some help where and when but if I could never manage to get through all of it, if there are any key points you would like answers drop some of them and I'll answer what I can off the cuff.

    I also have some interesting info on the bank charges thing which would blow the whole thing apart if I had any documented proof of it but alas I only have what I have been told but what I would say is that a lot of work was done to create a true cost of missed payments and including everything that could be included came to about £2 which was calculated by one of the big accounts (KPMG or Deloitte or someone) that was something they certainly do not want to get into the open!!!


    Thank you Elmo.;)
    That is great hun.:beer:

    I have also sent you a PM.;)

    Many many thanks.

    Di
    x
    The one and only "Dizzy Di" :D
  • di3004
    di3004 Posts: 42,579 Forumite
    pinknico wrote: »
    Yes things have changed a lot since Feb. so its worth a try.Also I think a move to Germany is a good reason why you have not contacted the FOS yet.


    Hi there Pinknico hunni, hope your well.:A

    Wow, I did not recognise you at first, very nice avvie.;) xx
    The one and only "Dizzy Di" :D
  • marshallka
    marshallka Posts: 14,585 Forumite
    di3004 wrote: »
    Welcome Finance:

    http://www.fsa.gov.uk/register/firmRegulator.do?sid=117751

    Covered as from 2/11/2004
    Di, for the sales of insurance the company had to be a member of the GISC prior to 2005 even if they were registered with the FSA earlier.
  • di3004
    di3004 Posts: 42,579 Forumite
    marshallka wrote: »
    Di, for the sales of insurance the company had to be a member of the GISC prior to 2005 even if they were registered with the FSA earlier.


    I know Welcome were members of GISC before that but can't remember if it were 2003 or earlier......:confused:
    The one and only "Dizzy Di" :D
  • marshallka
    marshallka Posts: 14,585 Forumite
    GIOL_Elmo wrote: »
    Hi all, I've never been on this thread before but since I have just finished up with a bank and have been involved in a number of ways with PPI I am going to try and share some of my knowledge with everyone in the hope that some people can find some justice.

    I believe PPI is a very very poor product and knowing the details of it has re-inforced this belief. What is covered/excluded in these policies can be crazy but the most shocking facts are the way it is looked upon inside the banks and the way in which banks operated in the personal loans market and their reliance on PPI.

    I am happy to pass on any info I can to help but I will not be disclosing who I worked for in public as the roles within the banking sector I worked in are very close knit and I wouldn't like people knowing who I am, but I will say I worked within risk and was involved in profitability modelling, scorecard development and other things like that.

    If anyone has any questions it would be great if you could put my username in it as I will be doing a search on that and trying to answer all that I can.

    So here is some information you might not previously have known about the way banks worked in terms of PPI and their reliance on it etc.

    You take out a loan and they sell you PPI on top of the loan, these are some theoretical numbers I have pulled from best buy tables at the moment but to bo honest the numbers were higher a few years ago. I have used an average loan of £10,000 and term of 60 months. Here is what banks do not want people to know!!!

    Loan - £10,000
    Term - 60 months
    Rate - 8.7%
    Interest Payable - £2,273

    Once you take into account cost of funding (somewhere around 6%) and bad debts for a campaign like this depending on scorecard cut-offs will be around 2%. This varies with how extreme rate for risk is being applied etc selling these loans will be breaking even or making a 1% - 2% margin. Now for PPI.

    Capital for PPI - £2,074
    Interest for PPI - £1,278

    For this you need to need to allow for funding the PPI capital but the cost of maintaining a PPI product is somewhere between 40% and 50% so this loan without PPI will break even roughly and sold with PPI will make around £1,600 which is all profit!!!

    So the 40% - 50% of the PPI payments get put into a big pot and from there any claims get paid, any refunds from cancelling the policy and early repayment of the loan gets paid and bad debts from customers not paying back, and then if there is some left the company gets another nice little profit share on a yearly basis.

    As I said above for accounts taking PPI you get somewhere in the region of a 16% return on capital which is not a bad margin and allowing for roughly 1 in 3 taking PPI means you can essentially create a 5% margin on your entire book by selling loans that make no money.

    This is a reasonably common business model to sell loans which on their own are break even and then sell PPI which on average will be sold at somewhere around 30% penetration you have a successful business model and one that banks are going to fight all day.

    Things were even worse about 3 years ago when loans were available at sub 6% and cost of funding them was over 6%!!!

    Hope some of this helps and as I said any questions just let me know.
    yeah thanks for your support.
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