Barclaycard (Morgan Stanley) Compound Interest Help

[makkapakka69]

Hi all,

 

Firstly, I'm brand new to these forums, so I hope this has been posted in the right place! I've been an avid reader for ages and this site is great for advice so I've finally registered!

 

I've been reclaiming mis-sold ppi from Barclaycard from an old Morgan Stanley account opened in 2000, with ppi attached from the very start. I've previously received copy of original CCA and this confirms no ppi was not applied for, and was automatically added to the account.

 

Barclaycard replied with an initial offer of settlement of around £1,500, but this only went back as far as 2004 (6 Years). I replied back with copies of additional statements and asked for a full refund back to the start of the account. They have now replied again with an increased offer of around £2,900.

 

All good so far, however they say that this figure includes compound interest and an additional 8% simple interest payment. They have provided a breakdown of each ppi payment made and the compound interest they believe is due on each payment. However their figures are tiny and differ greatly to the calculations I made myself using a link to one of the many compound interest calculators on the internet.

 

What I would like to know is are their figures correct, or are they trying to fleece me of the correct amount of interest? Here are a couple of examples of their figures:

 

PPI Payment of £27.86 made on 21st Dec 2004 @ APR of 20.9%

 

They calculate compound interest of £2.38 is payable on this amount, however I calculated compound interest of £55.85 (when I complied the letter about a month ago).

 

In total, nearly £2,000 has been paid in ppi payments since 2000 (account was closed in 2007). From this amount, they calculate that the total compound interest due is a mere £260 with a further £600 in 8% simple interest on top of that. The interest rates ranged from 16.9% to 20.9% over that period.

 

According to my figures, this should be thousands more. Have I calculated correctly or am I way off the mark? They have asked for the acceptance form to be sent back within 14 days and have issued their final response.

 

Should I accept, or let it go to the FOS. I've had previous ppi complaints with the FOS and these have all taken over a year to sort out, so I know this could put the settlement back ages. Or could I accept their offer in partial settlement and then refer the matter of compound interest to the FOS?

 

I'd be greatful of any advice on this.

 

Thanks in advance,

 

MP.

[slick132]

Hi Makkapakka and welcome to CAG.

 

I'm moving your thread to the PPI forum where I hope you'll get the input required.

 

[dx100uk]

no you are correct

stick by your guns

 

little fleecers!!

 

dx

[saintly_1]

Thread moved ;-)

[TINK660]

You will have difficulty getting the FOS to address the issue of compound interest, I have tried with MBNA and they just dont seem to want to take on board what you are trying to say. The just state that your complaint has been dealt with in accordance with their redress advise given to the company - which in my opinion and a lot of other peoples clearly wrong. I successfully claimed back charges with compound contractual interest and they are added on to the account in the same way as ppi and then interest calculated on the whole balance. I think the only option will be down the court route to claim the interest but raise the point with the FOS as the more people that do query it, the more it shows that their redress advice is not correct.

[slick132]

The only good thing about the FOS is that you are not bound by their decision if it goes against you. You can still go on to take court action if you want.

 

They calculate compound interest of £2.38 is payable on this amount, however I calculated compound interest of £55.85 (when I complied the letter about a month ago).

 

I used this calculator to check your figures and got £55.33 as at 1st April 2010 - Compound interest calculator

 

So your figures look right and you should seek the refund you want as per your schedule. Court action may be the best way forward if BC remain intransigent.

 

[makkapakka69]

Thanks for the input guys.

 

So I am right in thinking that if I refuse their offer and take it to the FOS, the chances are that the FOS will just rule that they only have to pay roughly what they are already offering me?

 

If so, then no point in using FOS as i'd be waiting over a year for roughly the same settlement figure. So that only leaves the court route.

 

Can I accept their offer as "partial settlement" and go on to pursue the compound interest through the courts, or would accepting their offer in any way stop me from doing that?

 

The thing is with this is that I could really do with the settlement money now, but i know that the mis-selling is vertually 100% cast iron as I never applied for it on the application form and it was automatically added onto the account from the very first statement, so I know that I should win in court (if it got that far). Does anyone have any idea how Barclaycard would defend this?

[slick132]

You can accept their offer as partial settlement and make it clear that you'll pursue the balance which is due as per your SOC.

 

BC tend to refuse to pay anything involving compound and/or contractual interest until they are forced by a court claim. They'll defend all the way up to a court hearing and usually negotiate a settlement just before a final court hearing date.

 

If you are careful in your preparation and clear about what you're doing, you should get BC to back down and settle in full.

[makkapakka69]

Just being re-reading their settlement offer letter which reads:

 

"I can confirm that our redress calculation process is in accordance with the guidance we have received from the Fianancial Ombudsman Service".

So this means PPI payment + Compound interest + 8% simple interest

 

The thing is they claim that they are already paying me the compound interest due, but why is it so low? Anyone know how they could have reached the figure they did and what formula they used?

 

Slick, what is a SOC? - Not clued up on court lingo....... yet!

 

Never been to court - either way!

[slick132]

Hi Makka,

 

Never mind why their figures are so low. Just make sure yours are right on your spreadsheet.

 

SOC = Schedule of Charges.

 

If you play your cards right, you won't have to face BC in court although it's a possibility.

 

You should be able to negotiate a settlement before the hearing date.

 

[makkapakka69]

Hi all,

 

Just a quick update on this.

 

Sent Barclaycard an offer of settlement half way between their offer and what I believe is due to me.

 

To be honest, i'd be pleased if they do agree, even if it is short of the total amount. If they dont then its off to court we go!

 

I'll post back with their reply.

 

MP.

[makkapakka69]

Oh yes, a couple of other things!

 

Does the fact that there was once a credit balance on the account affect the compound interest due? This was for about a year around 2005ish. This was being debated on another forum.

 

Just need to be sure of my figures if they decline my offer.

 

Secondly, this account was flogged to a DCA in 2007 (who have washed their hands of the ppi and refuse to accept that it is an issue - but thats another story!) and the balance reduced to nil with the OC. Does the fact no interest has been applied to the account since then affect anything?

 

Ta!

[dx100uk]

Oh yes, a couple of other things!

 

Does the fact that there was once a credit balance on the account affect the compound interest due? This was for about a year around 2005ish. This was being debated on another forum.

 

- yes , as there was no outstanding bal , you were not charged interest, so you can't claim int at their rate because none was charged.

you wouldhave to get the T&C for THAT period, to workout what was paid-out first [in order]. this will also have an effect on other years too.

IMHO: once you were in credit you can no long claim int at their rate because the charge has been paid, but you can still claim 8% stat.

 

Just need to be sure of my figures if they decline my offer.

 

Secondly, this account was flogged to a DCA in 2007 (who have washed their hands of the ppi and refuse to accept that it is an issue - but thats another story!

 

- yes but thats nowt to do with the DCA, your PPI reclaim is always against the OC

 

and the balance reduced to nil with the OC. Does the fact no interest has been applied to the account since then affect anything?

 

as above .

 

 

Ta!

 

dx

[makkapakka69]

dx

 

So this would mean that all figures calculated using one of the compound interest calcalator links are incorrect!

 

Account was closed in 2007 and no interest paid since, yet compound interest calculations were calculated in early April 2010 from date applied to account to that date.

 

Should be much less than I quoted then? OOPS!

[dx100uk]

basically

you can only charge them int at their purchase rate WHEN they charged you it!

 

8% stat is diff

it is like a 'payback' for depriving you of having the money to spend.

 

dx

 

 

dx

[slick132]

I have to disagree with DX's opinion about interest when the a/c balance was zero.

 

Claiming interest in restitution is about fairness. The bank charged you money for PPI and that money has been used in the course of their business to lend to others at the bank's contractual rate. You therefore claim compound interest, in restitution, at the bank's contractual rate to restore balance, or fairness.

 

Please read the Interest Tutorial at Link No6 in my signature for more about this.

 

The problem which I see is that you haven't actually paid the full a/c balance to the DCA after the a/c was sold by the OC.

 

But I don't see that this affects the interest which you should claim on the charges that you paid. If they haven't been charging interest recently, perhaps that's their problem.

[dx100uk]

thank you slick

always like to be corrected.

esp when it costs the fleecers more money.

 

dx

[slick132]

Hi DX and Makkapakka,

 

I'm NOT correcting but merely saying I disagree about something. Dosen't mean I'm right !!

 

I'm not certain about the position after the a/c was sold and they stopped adding int't. But I think that may just be the bank's or the DCA's hard luck.

 

But I'm sure you are entitled to compound int't in restitution because the bank have had your money, and used it for their profit.

 

[steven4064]

The interest tutorial cover all of this but, in a nutshell:

 

1. Obviuosly, you claim back all the charges (not just the excess over £12, either)

 

2. You should recalim the interes they added to the charges. You calculate this by starting from the beginning and keeping a running total of the charges. From each monthly statement you estimate the interest they added by multiplying the actual interest charged by (total of charges/balance) if total of charges the balance. Obviously, if you were in credit, the interest actually charged is zero, so the above calculation gives zero too.

 

3. You can then claim interest on the whoe lot (charges plus interest) in restitution as Slick has expleined. This can either be 8% simple interest under s69 of the County Courts Act 1984 or compound interest at some commercial rate using the Sempra Metals case (butonly if you really understand it - otherwise you will get in a mess)

 

Hope that helps.

[makkapakka69]

Thanks for all the replys guys!

 

Barclaycard should have received my offer by now, so i'll post back when I get a response.

 

The thing with this account is that I always thought that any refund of ppi and charges (not even started on the charges yet) would come off the balance of the debt with the DCA which is currently about £7,000. But becuase the debt has been sold, Barclaycard have indicated that they will be refunding me directly! (Sorry DCA:D)This means money into the pot for full and finals from my other debts which will be a great help, plus cash in the bank to help with my DMP budget.

 

I've stopped paying the DCA due to their incompetence and lack of respect of the CCA1974. Basically, they haven't been playing ball with my requests for information so I removed them from my now self managed DMP. The account is completely unenforceable as per many Morgan Stanley accounts from the time (2000). And as for the default notice, well.......:eek:

 

They have threatened me with court action and believe that I am wrong. They also offered a 50% reduction in settlement in the same letter. I politely refused and asked them to take me to court if they want. Not heard back yet, but if I do then I'll let you know!

 

MP.

[steven4064]

If you are claiming back PPI - then paragraph 3 in my last post applis to that too.

[makkapakka69]

Cheers!!!

[makkapakka69]

Update on this.

 

Well, had a reply from Barclaycard. Their final offer of a little under £3,000 is totally final and they wont budge on the compound interest figures.

 

So I decided to seek some legal advice on the matter and contacted a local firm of solicitors. After fully explaining the situation, they said that I did have a case, however they also stated that if I won in court, the court could decide to have the amount awarded deducted from the total amount still owed to the DCA! (Which is approx £7,000)

 

Apparently, creditors can buy back debts sold to DCA's!!!

 

I'm currently not paying the DCA anything due to various CCA defects and missold ppi and I am certain it is unenforceable, so obviously dont want this to happen. To be honest, i'd rather take the £3,000 and run, knowing that the rest of the debt is unenforceable.

 

DCA have thretened court action, but so far its all been hot air. I've got them well and truely snookered on the default notice. Also, the amount they claim is owed includes this now confirmed missold ppi, so they cannot legally claim I owe it, right?

 

Was thinking of offering a really low full and final and see if they bite.

 

Any advice on all of this?

 

MP.

[dx100uk]

urm...

 

i cant see that.

yes they could poss wriggle set-off in there somehow.

but that can only be ARREARS

 

dx

[slick132]

I think you stand little chance of getting them to accept a low F&F. Anything below 75% is unlikely.

 

The only way you'll get a direct refund of the charges plus interest in restitution is to take pro-active court action against BC. You would keep the court claim active until BC agree to refund to you direct.

 

It ends up a bit like playing Chicken. They try to argue and put doubts in your mind about how likely you are to win, and what their costs may cost you if you lose.

 

I will not argue about the advice from your sol'rs. However, experience shows that cases like this very rarely go into court because BC will settle beforehand.