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Mendel Birnbaum

PPI and the hidden snowball effect on bank charges

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Hi and thanks for reading.





I take out a loan in 2005 with (Optional) PPI and pay it off in full without settling early.


The loan repayment is £400 including PPI of £50.



Proposed Interpretation and Complaint


Fact: Had I had not been paying that PPI every month my account would have been cumulatively £50 better off.


This means every month my statement is diverging at a rate of £50 from what it would truly be had there been no error on the bank's part. In essence I have two statements, the issued incorrect statement and the adjusted correct statement.



Numerical Example


Month 1 ==> Balance +£50

Month 2 ==> Balance +£100

Month 3 ==> Balance +£150


Month 20 ==> Balance +£1000


The bank has already admitted liability and state in their letter to me what their intentions are:


"Please be advised that this redress remedy has been designed to ensure that you are put back to the same position you would have been in, had the single premium PPI not been included with your loan"


This statement can only be taken as a wrought commitment which they cannot renege on. Even if the calculations they perform do not marry up with that statement, then I would argue that it is their calculations which need amending and not the statement, as they have explicitly stated their aim, whereas these kinds of calculations can be confusing by their very nature.


If I can prove that their offer does not "put me back to the same position I would have been in", then they have no choice but to honour their promise.



Show Me The Money


The implications of the above are that every entry in the issued incorrect statement would need to be adjusted, having an impact across years of banking. Think about that a second:


For example, if the bank take £50 out of your account that they should not have in 2005, then there is no way for them to justify an unauthorised overdraft of £30 in 2010, because had they not made that erroneous withdrawal, you would be £20 in credit and there would be no charge.


Speaking from experience, I have accumulated about £700 in an account over 18 months which means that there is no way whatsoever in the following 5 years I would have ever been overdrawn or had a direct debit returned unpaid, which entitles me to claiming all of my charges back.



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This is a very interesting point that you have raised.


I am in a position where I am about to reclaim PPI for Bank Loans dating back to 1992. However over this period (1992 - 2002) I incurred about £1300 of charges.

Using the theory above "put you back in the position you would have been in if PPI not applied" I think that is reason enough to reclaim your charges.


However I think it will depend upon the wording of the letter if you are successful in reclaiming PPI.


Best of luck and if possible let us know how you get on !!!



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Yes, please keep us updated on your progress.

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Dealing with Customer Service Departments? - read the CAG Guide first


1: Making a PPI claim ? - Q & A's and spreadsheets for single premium policy - HERE

2: Take back control of your finances - Debt Diaries

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2: Does your Bank play fair - You can force your Bank to play Fair with you

3: Banking Conduct of Business Regulations - The Hidden Rules

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5: Fair Treatment for Credit Card Holders and Borrowers - COBS


Advice & opinions given by citizenb are personal, are not endorsed by Consumer Action Group or Bank Action Group, and are offered informally, without prejudice & without liability. Your decisions and actions are your own, and should you be in any doubt, you are advised to seek the opinion of a qualified professional.



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