Quick PPi question

[Doshy]

If you took out a loan a long time ago which had miss sold PPi on it then 3 years after that took another one also with PPi, which of the following would net more compensation:
If the second loan was taken out for a car for example or to pay off the first loan and an overdraft.
Hope that makes sense, it was a discussion in the boozer last night....

[Steve Evil]

It won't work like that, the compensation level depends on how much the monthly charge was for the PPI and how much interest would have accrued if that money had been left in an account rather than being taken from you every month.

[Doshy]

but also how much of that front loaded PPi you actually paid off before the loan was paid off or cancelled, this also takes into account the APR etc. Therefore if you took out loan 2 to pay off loan1 then you're still paying the PPi from loan 1.....??
As you can guess, I'm not an accountant.

[Doshy]

Anyone ?

[OllyMo]

You're asking about linked vs non-linked loans.

If they're linked, i.e you use the loan to pay off another loan (these are actually linked in the Banks systems) then the redress will be much larger.

If you took out a second loan, which was for a car or something else, then it wouldn't be linked to the first loan at all (unless you had specifically said that it was for 'paying off this loan, and buying a car with the remainder').

I used to work in PPI, and half the job was linking loans together so that the Redress team would be able to do their calcs properly. We used to link them in a few ways by:

1) Where a loan had specifically been taken out to pay off another loan
2) Where a loan had partially been taken out to pay off another loan, and the rest went on something else
3) Any loan taken out within a certain time period of another loan, it was assumed they were somehow linked even though the customer had not specified that. Gives the customer the benefit of the doubt

Does that make sense?

Edited by OllyMo on Thursday 5th March 12:16

[Doshy]

OllyMo said:

You're asking about linked vs non-linked loans.

If they're linked, i.e you use the loan to pay off another loan (these are actually linked in the Banks systems) then the redress will be much larger.

If you took out a second loan, which was for a car or something else, then it wouldn't be linked to the first loan at all (unless you had specifically said that it was for 'paying off this loan, and buying a car with the remainder').

I used to work in PPI, and half the job was linking loans together so that the Redress team would be able to do their calcs properly. We used to link them in a few ways by:

1) Where a loan had specifically been taken out to pay off another loan
2) Where a loan had partially been taken out to pay off another loan, and the rest went on something else
3) Any loan taken out within a certain time period of another loan, it was assumed they were somehow linked even though the customer had not specified that. Gives the customer the benefit of the doubt

Does that make sense?

Edited by OllyMo on Thursday 5th March 12:16

That's great, thank you very much for that.

[OllyMo]

No problem. And to answer your actual pub question, linked loan redress is significantly higher than non-linked, as all the PPI is rolled up and interest paid on it more than once, as you thought.