Thread: Canceling LPI (Lloyds loan protection insurance) WITHOUT reclaim

Hi Everyone,

I hope someone can give some insight here. I've tried to make this as clear as possible.

What I want:

I want to cancel the LPI (also called PPI generally) on my Lloyds loan (of around £3500). I simply don't want this insurance anymore (other than not needing it for this relatively small loan, I gather it's rubbish anyway). I don't want to reclaim payments I have already made or claim that the LPI was missold to me in the first place.

What the agreement says:

(1.4)
"If you choose to purchase LPI, we will pay any LPI loan directly to the insurer to cover the price of the premium. If you decide to cancel the LPI policy the LPI loan will also be cancelled. The cash loan will continue and we will collect only the monthly repayment for the cash loan."

What I think this means:

My monthly repayments consist of £x for the cash part (under a column titled "Cash Loan" on the agreement) and £y for the LPI (under a column titeled "LPI Loan" on the agreement). The £y is paid directly to the insurer. So I pay £(x+y) per month, which I agreed to and I accept this. I believe the agreement says that if I want to cancel the protection the LPI loan will be cancelled (the £y per month) and they will collect only the cash part (£x per month) from me, which is exactly what I want. After all, there are two distinct entities on the agreement, the Cash Loan and the LPI Loan, and the agreement says that the LPI Loan will be cancelled, leaving only the Cash Loan.

What's happened:

They say:

[I]The cancelation of the LPI loan can only happen by creating a new loan to pay off the existing loan, as if I'd settled it early. I.e. you 'get your money back' in the form of the LPI Premium rebate from the early settlement of the old loan, which is used to compute the new loan. This is the way it works, full stop.

The term "LPI policy" means the loan as a whole (i.e. the cash loan plus LPI loan), so that (1.4) actually states that the only way to not pay LPI is to cancel the "LPI policy" and create a new loan.[\I]

It basically came down to a discussion about what is the different between "policy" and "loan". Terms there were spouting and redefining freely in order for it to suit them best. There was also talk of you having to do this within 30 days of taking out the loan, which isn't even included in (1.4).

I was somewhat pressurized into agreeing to a new loan, which was done over the phone. The representative baffled me by continually firing figures at me. Believe me, I am good at maths: but it was alright for her as she had a computer doing the hard work for her. I have received the documents but not signed them. The above comments were made by branch representatives and another loan-team representative.

Interestingly, (1.4) is missing from the new (unsigned) loan agreement, which makes me think that in the time between me taking out my current loan and now they have changed the way they work. This was eluded to by them, but in such a complicated way I had no hope of understanding. The most I got was that something changed in January. However, they also said that (1.4) is only missing on the new loan because it is not a "LPI policy", but I don't agree with this. If (1.4) is only included on these so-called LPI policies then why would it begin "if you choose to purchase..."? My impression is that they are making it up as they go along.

I've done the calculations and, unsurprisingly, it will cost me hundreds of £s more to have this new loan rather than simply paying £x per month on the remaining balance of the Cash Loan, as (1.4) suggests.

My Question(s):

Who is correct?
Have I misread (1.4) somehow?
Has anyone else encountered this issue?
Is the Bank actually making it up as they go along?

It seems utterly bizarre to me that one would have to get a new loan to simply cancel the LPI.

Many Thanks in advance. All help appreciated!
Resonate.

Thanks for your prompt replies!

I will take a look at the FSA site. I do have a copy of the agreement. When you say post it up, do you mean post it on here in the thread? (with personal details removed).

Thanks again.

Sorry for the delay, but here are the pages of the loan agreement I was discussing. I hope someone is still watching this post. The main point is Term 1.4, which I have highlighted on page 3.

The Bank have said that if I am unhappy with what they have said so far (which is mainly waffle) then I should write a letter to them. I didn't want to deal with the hassle of all that yet, but I am now more determined to get what I want.

Your thoughts would be most appreciated!...

Resonate.

This loan was taken out in June 2008.

The agreement for the (still unsigned) new loan, which they tried to sell me in January as a 'refinance', does not contain this clause. I contended this and they said that something did change at the beginning of this year. I was so confused by the waffle that I never understood what exactly had changed. On another occasion however they claimed that the new loan does not contain this clause because it is not 'an LPI policy' (see original post).

Interestingly, my online banking has this footnote under my Loan section:

**If you have purchased loan protection:
Before 4th January 2009, the repayment amount includes your monthly Loan Protection premium. From 4th January 2009, the repayment amount excludes your monthly Loan Protection premium, which will be taken under a separate direct debit from your current account.

It appears to me that the way in which LPI is handled has indeed changed. They were possibly trying to say that under this new 'scheme' one is able to cancel the LPI easily. However, my agreement does contain this clause, which, as you agree, I do not believe I have misunderstood.

I am so frustrated by it now that I am beginning to wonder whether I was actually mis-sold the LPI Loan in the first place. I am a student and, aside from my non-taxable grant, only work a few hours a week. If I ever really did need to claim on the insurance it would surely be declined? Also, I distinctly remember the Customer Service Officer saying that if I did "not choose to have the LPI then it is more likely that it will be refused". Another point of contention?

Do you think it's worth writing to them? I have started a letter, but am finding it difficult deciding what to say.

Many thanks. Resonate.

Perhaps someone would be kind enough to let me know what they think of this letter I have drafted regarding these matters. Is this address OK?...I can't remember where I got it from now!

Thanks, resonate.

OK thanks, I have added that comment near the end.

Does anyone else have any more thoughts on this? Aside from reclaiming PPI payments already made, has anyone else tried to simply cancel their PPI with/without success?

Most appreciated.
Resonate.

hmmmm extremely interested about this - I called Lloyds as I am trying to reclaim PPI as I have an existing medical condition that I have since been informed would exclude me from claiming - in the meantime LLoyds wrote offering to cancel future PPI whilst they looked into it but told me to call the Loan Centre - I did and was told by a man there that I had 50 months left so I would repay £23 per month less when I signed the new DD mandate they would send.

I now assume therefore that they to will make me refinance which again isn't really what I wanted but is there really anything wrong with this? Sorry if I'm being thick.

What's wrong with refinancing is that it will cost us more than just simply canceling the insurance. They do this by giving you a "LPI Premium rebate" (see the table in your Agreement) from the old loan, then calculating a new loan that will "pay off" the (slightly discounted) old one. The rebate will not be the total still left to pay on the insurance, but less, hence the cost to us.

If you are allowed to cancel the LPI payments then this is all it should be: cancel, not a more costly refinance. In addition, if you were to reclaim PPI for some reason (i.e. medical etc) then you should be able to receive the whole insurance amount back. Refinancing your loan is their way of sneakily getting more money out of you. This is what I do not agree with.

For you, if they have agreed to cancel future PPI payments then refinancing should not come into it, I would hope. Is the £23 figure the monthly repayment amount stated under the column titled "Loan for Loan Protection Insurance ("LPI")" on your Agreement? This is the amount I want them to stop taking, not anything less, which they have so far not agreed to!

Resonate.

ahhh i see and my God they are trying to [problem] me - thank you as without reading this I would have been none the wiser and just signed the new DD to reduce the payment by £23 from £119 to £96...this is until I look at my agreement and see the PPI payment per month is £31.49 - so they are under refunding me by £8.50 per month over 50 months left on my agreement so they are actually conning me out of £425!!!

I to have the clause 1.4 in my agreement that says if you decide to cancel the LPI policy the LPI loan will be cancelled. The cash loan will continue and we will collect only the monthly repayment of the cash loan

As I read that they should therefore only be taking £87.75!!

Oh Lloyds are gonna get it tomorrow, I'm convinced they've tried to pull a fast one on me!