LSAP & PPI

[Daf Hucker]

Has anybody looked at the possibility that the insurance that is paid alongside the Long Service Advance of Pay (LSAP) is a mis-sold PPI?

I don't remember being asked if I wanted it and I wouldn't have asked for it.

Daf

[Al R]

Who underwrites the insurance component.. and why did you have it, were you asked (or told as a condition of it)?

[Tiger_mate]

The insurance was/is mandatory.

[Al R]

I accept that the MoD has an obligation to look after public money, but couldn't those applicants who were eligible for EDP have elected to have had a first charge levied against the sum advanced without being so prescriptive that you had to have PPI?

And if you were discharged for conduct unbecoming, or something similar, would the PPI still pay out? If discharge was on redundancy or medical grounds that was not the fault of the service, it does seem slightly perverse to penalise the individual compared to someone who wasn't injured or made redundant.

It might be very useful (and cheap?) and a no-brainer, but I can't see why it should be mandatory. As a matter of principle, it should be up to the individual, surely.. or where would you draw the line?

[High_Expect]

Daf Hucker... I'm with you on this. I did not need the insurance ( I could pay back the £4000 tomorrow if needed) I just took the LSAP as it was a tax free loan to offset mortgage interest. I can't imagine the insurance is an in house MOD thing it must be a civil product. Interestingly the LSAP doesn't show up on my Experian credit report.

I'll PM you. Let me know if you find anything out. :D

[GalleyTeapot]

It wont be on credit report as its not credit, its an advance of pay which is legally totally different apparently.

[High_Expect]

Fair enough - I wonder what the original paperwork says about the insurance or more importantly what they call it. Probably Insurance to Protect Payments which means they're not liable for PPI payouts.

[Al R]

I don't imagine that the Financial Ombudsman would bother about the name at the top of the policy document; if it walks like a duck.. well, it is one. And at any stretch this seems to be Income Protection/Payment Protection. Just because you're a serviceman and just because there is some clause in an LSAP agreement, do you lose your rights and does that make it 'right'? Possibly, possibly not, I don't know who would have legitimate ascendancy? But regardless of that, if you can't beat the principle, look at the process.

As a minimum, were you told of the policy limitations etc when you signed up, were rights of cancelation passed on to you, was the advice restricted or whole of market and/or were you allowed to source your own cover which may have been cheaper elsewhere but just as appropriate (look at the cost of PAX these days.) and were your personal financial circumstances taken into account?

Also, if you apply for LSAP as early as possible, you have longer to go before you have to pay it back, which means more premiums and more cost. Was the amount repayable advised to you, were you advised that waiting might mean less cost to you and were you told how much commission would be taken by the product provider?

Whoever underwrites this cover, has a responsibility under the Financial Services and Markets Act to ensure that the client's needs are being catered for and not the MoD's (which seems to be acting as an introducer). It seems that the MoD's and the public purse's needs are being catered for here.. but at the expenmse of the client's? The MoD might have an insurable interest in the serviceman repaying the debt, but the contract is with the client.. ie; you, the serviceman.

If anyone would like to pass me details, I can certainly take a look at it from a compliancy and regulatory financial services standpoint and pass it onto a few people for a more informed (legal) view.

[Daf Hucker]

I haven't got access to the original paperwork at the moment, but I'll look it out when I get back home and get back to you.

Daf

[Al R]

Please do. Drop me a PM and I'll give you some contact details or Google me (left).

[Onceapilot]

Out of interest, do PPI claims just cover the cost of the mis-sold insurance or, is there an extra "bonus"?

OAP

[Al R]

That will depend on the headline at the top of your complaint (negligent advice, breaches of obligation, misrepresentation, genuine mistake, non-disclosure, failure of contract) etc. Some do give rise for the (in this instance) insurance to be regarded as cancelled from the start, others to a right to compensatory damages.

If it is right to treat the insurance as cancelled from the start, the premiums might be refundable, but other claims might not be paid. You can of course, argue that if you hadn’t paid the premiums and had otherwise invested in another product/savings/investment/pension then you may reasonably have accrued ‘x’, working on the assumption of accruing interest at ‘x’ compounded over ‘x’ period of time.

The Financial Ombudsman (FOS) will normally try to put you back into the position you would have been in but for the failure on the part of the financial transaction. Typically, that will mean assessing redress on the basis that you would not have purchased that particular policy if the financial business had given a fair recommendation and/or had given appropriate information before/during/after the sale.

It seems to me that there are two issues here; firstly, the role of the MoD in insisting that you MUST have some form of income protection in place and secondly, the role of the company in how they sold it to you. The first would be nothing for FOS to be involved with because the MoD isn't authorised or qualified to offer financial advice and the caveat forms part of a contract (to my untrained eye anyway). Although it seems unfair and shotgun like in its approach, there is nothing to stop the MoD laying down conditions and you, either accepting or denying them.

I do think though, they should offer you the choice of more than one product provider; I have worked with the MoD as a volunteer on the Money Advice Service programme and this seems to be completely alien to the spirit of the thing. Perhaps the left hand doesn't know what the right hand is doing.

The issue might be more with the product provider. If the advice was simplified, ie; if they didn’t establish affordability with you, assets, liabilities etc (which I have to, iaw the normal advice service) then they might not have done anything wrong. If though, they didn’t address your rights iaw consumer legislation (rights of cancellation etc), then there probably would be grounds for appeal to FOS on a technicality.

Added; it might be that the terms of the conditions are unfair, in which case you might have redress against the MoD in civil courts if you can argue against who or how you were unfairly treated. For instance, the earlier you take LSAP, then it might be that you have longer before you pay it back and in that instance, you would be paying out more in insurance premiums compared to someone who takes it out later on in his/her career. Thats not a FOS issue, and not one you can take out against the insurance provider - deffo one for a solicitor I guess.

[Onceapilot]

Thanks for the reply Al. As a past LSAP recipient I feel that it was useful to me and although I might have been given no choice, the effect of the insurance was to make the system available. I will not now argue the toss. There are much worse deals being forced upon us today, IMO.

OAP

[unclenelli]

It wouldn't surprise me if they were underwritten by PayDayUk (same uniforms) at 2090%APR

(Deliberately not hyperlinked)

[cynicalint]

I took out an LSAP in 1998 and noticed some way through the payback period I was being charged LSAP insurance that I was not paying for the first few years, but thought nothing of it at the time as it was only about £1.50 per month and I did not connect that payment with a mis-sold PPI. When I signed the original agreement, the document I signed stated that I would pay back any sums owing, on discharge before completion of payment, from any terminal grants earned and no mention was made about insurance for the LSAP. I feel that a claim is in the pipeline!

[Daf Hucker]

Al R, PM sent.

Cheers,

Daf

[Al R]

E-mail sent.

Regards,

Al.