When it comes to big banks it is often said that loyalty doesn't pay.
However, in an unusual case, 40 years of sticking with Lloyds Bank was the main reason behind a Hertfordshire man obtaining a £12,000 mis-sold PPI payout.
But Richard Harvey's case also highlighted how the banking giant stung him for worthless insurance over all those years of loyalty since the age of 18.
Four decades with the same bank, helped Lloyds uncover that a customer was owed £12,000 in PPI payouts and interest
Richard, of Rickmansworth, Herts, decided to make a PPI claim on the deadline day last August, having heard about the time limit in a radio advert.
He had taken out loans from the bank to pay for cars in the past, as well as having had Lloyd's credit cards, but could not remember specific details of any payment protection insurance.
However, he suspected that the bank may have added on the insurance without him realising, as happened to many other customers of Britain's banks.
Richard told This is Money that he was simply asked to give Lloyds his personal and account details through its own PPI claims portal, and the application process only took around 15 minutes.
Having sent the application off on 29 August last year, he finally received a letter in early January, dated Christmas Eve.
It said Richard had taken out eight historic loans over the course of banking with Lloyds, two of which had PPI attached. The PPI added, plus the higher cost of another loan, combined with interest he was owed delivered a total claim amount to be repaid of £12,200.
Richard said he must have taken out the loans 'back in the eighties or nineties', and 'would never have remembered' had all his banking not been in one place with Lloyds.
How the £12,000 PPI payout added up
The cost of the PPI policies added to Richard's two loans were £816 and £3,145.
As well as those two loans, on which Lloyds found he had been mis-sold PPI and was due refunds of £592 and £2,324, the bank said a third loan he had taken out was higher due to the previous PPI premiums he had paid.
This meant he was due a payout on that loan too, despite the fact that he had not been mis-sold PPI on it.
Lloyds said in its letter the extra amount he paid due to PPI on previous loans, and the amount they owed him, was £1,390.
While the redress amount of £4,306 would already represent a substantial windfall given how Richard had taken a punt on the claims deadline with no idea whether he'd ever had PPI, the total sum he ended up receiving was even bigger given how Lloyds added compensatory interest of £7,902.42 to the total.
Banks have added 8 per cent annual interest to the initial premiums, to reflect the fact those mis-sold PPI could have invested the money instead.
After tax, the total amount he ended up with was £10,824.06.
The Lloyds letter stated: 'The offer includes a refund for the extra amounts you paid when you refinanced your loans, plus additional compensatory interest.
'The outstanding balance on the loans you refinanced was higher because you had PPI. So, your next loan amount and the repayments for it were larger.'
A separate letter on the subject of his credit cards enquiry asked for further information, so he's unsure whether he might be in line for even more money, though he can't remember some of the details he may need to send off.
Richard said: 'My suspicion is my protection insurance gave me no more than what I would have got through my work already.
'One of the learnings I've taken from this is there are some benefits of staying with my bank all this time.'
Buried treasure: Richard Harvey put in a PPI claim on the deadline last August, only to find out he was owed money from three loans taken out decades ago
Could some PPI claimants get tax back?
As in Richard's case, banks have tended to deduct 20 per cent income tax from the amounts they have paid out. However, since 2016 basic rate taxpayers have been able to earn £1,000 a year in interest without paying tax, thanks to the personal savings allowance.
Higher rate taxpayers can earn £500.
This could mean that those who have received compensatory interest for small PPI refunds should not have paid tax on their refunds at all, though higher rate taxpayers should have been taxed at a higher 40 per cent, so could end up with less.
Richard Morley, tax partner at accountancy firm BDO, told The Times: 'People are really confused about the rules.
'If your bank has already deducted basic-rate tax at source on the interest element, you would have overpaid tax in the tax year in which you received the PPI payout. You can claim a repayment of this overpaid tax by completing form R40.
'You normally have four years from the end of the tax year in which the overpayment arose to claim a refund.'
Meanwhile those who have underpaid need to declare this interest to the taxman, ideally as soon as possible.
Lloyds and PPI
Perhaps no banking group profited more - and subsequently lost more - from the rampant mis-selling of Payment Protection Insurance which took place until the mid-2000s than Lloyds.
The banking group, which comprises Lloyds, Halifax and Bank of Scotland, announced last October that it had to set aside a total £21.9billion to compensate customers like Richard Harvey who had been mis-sold.
A rush to claim almost wiped out the bank's profits in the run-up to the 29 August deadline.
Other banks were also hit by a late rush of claims, with Barclays announcing its PPI bill rose by £1.4billion over the summer, RBS £900million, HSBC £302million and Santander £169million.
The £4.6billion the banks set aside for late claims was amassed in just two months ahead of the final PPI deadline, and works out at £76million a day.
Between January 2011 and August 2019, the latest figures, the FCA says a total £36.8billion has been paid out to those who were mis-sold PPI.
However, this could be just a fraction of the total amount lying unclaimed. An estimated 64million PPI policies were sold, with the average payout £2,000.
This could put the estimated cost of mis-sold PPI at as high as £128billion.
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