Advice on Banks possible obligations...

30dirtybirds

Hi all,

I'm a long time lurker but have been crunching some numbers and would like to ask a few questions.

2 years ago I took out a loan for £12,000 the apr was a great 6.9% and everything was hunky dory (I would have paid £2,500 interest over 4 years)

1 year ago I needed a cash boost (to help pay for my wedding) so I went back to my bank thinking they would be the best option.

I told them I needed an extra £4,000 and they said I could take a loan to cancel my existing loan and the extra 4k and then I would just have one loan for £16,000

sounded good to me, and like most people (or most silly people I guess) I was so keen to get my hands of the cash I didn't spend much time reading the offer in detail.

Basically the kind lady offered to increase the term of the loan thereby I wouldn't be paying much more money every month, again sounds good to me (idiot)

anyway, to cut a long story short they hiked up my apr to a tasty 15.9% and my 12k loan with 2.5k interest is now a 16k loan with 10.5k interest!!!!

I can understand the mechanics behind this, and I can understand that I wasn't as careful as I should have been but it dawned on my today that they could have simply offered me a secondary loan to run along side the 12k one for 4k, the interest over 4 years would have been just £1,500 over 4 years even at 16.9% APR . resulting in me saving £6,500 over the duration of the loan.

My question is this, do banks have a duty of care to their customers to provide them with the best information when taking these loans am I living in cloud-coo-koo land?

Any ideas on a way forward to getting the bank to perhaps decrease my APR?

I've spoken to them about reducing the term of the loan but now they are quoting 22% APR which means I won't save a penny by doing so.

Any advice or even gentle mocking would be appreciated.

Cheers
Jamie

sdooley

You can complain and if they reject it you can take it to the Financial Ombudsman.

50:50 whether that'll get you anywhere but it looks like they didn't treat you fairly.

standupguy

Yes I agree, you were not treated fairly and have grounds to make a complaint.

They saw this as a way of increasing new business at the time from 4k to 16k and clobbering you on rate as well.

Selling is what was uppermost in their minds, not treating customers fairly

They will argue that you should not have signed the agreement if you were unhappy with the deal.

It is worth a complaint though.

Write to them and say that you are making a formal complaint which you expect them to handle under the complaints handling procedure regulated by the FSA. That will put them on notice that you mean business

You should get an acknowledgment of the complaint in 5 days and a response within 4 weeks.

30dirtybirds

Thanks sdooley and standupguy,

I've decided to write a letter, would you be so kind as to give it a once over?

Dear Sirs,

This letter constitutes a formal complaint and as such you are required
to handle it under the complaints handling procedure regulated by the F.S.A.

I have been a long time customer of your bank and have many accounts,
including a current account, an ISA, a credit card and a Loan with yourself.
Until recently I did all my banking, and that of my family through 
yourselves.

Two Years ago I took out a loan for £12,000 the APR was 6.9% and this was
ideal for me. (I would have paid £2,500 interest over 4 years)

One year ago I needed a cash boost (to help pay for my wedding) so I came
back to you thinking you would be the best option, not least because as a
customer I believed you had a certain duty of care to me.

I told you I needed an extra £4,000 and you said I could take a loan to
cancel my existing loan and £4,000 extra so I then would have just one loan
for £16,000

This seemed reasonable and, I suspect like most people ,I was so keen to
get my hands on the money that I didn't spend much time reading the offer
in detail.

The lady who arranged my loan change appeared to be most helpful and
offered me an increased term of payment so that the monthly re-payments
wouldn't increase too much which I thought was part of the bank living up
to its duty of care.

To cut a long story short the APR on my new loan was increased to an amazing
15.9% APR and so my original £12,000 loan with £2,500 interest is now a
£16,000 loan with £10,500 interest.

I can understand the mechanics behind this, and I can understand that I
wasn't as careful as I should have been and should have reviewed the APR
changes a little more closely but even ignoring that fact, it came to my
attention just recently that you could have simply offered me a secondary
loan to run along side the £12,000 one for the addition £4,000, the
interest over 4 years would have been just £1,500 over 4 years even at
16.9% APR . This option would have saved me roughly £6,500 over the duration
of the loan.

The end result is that my bank, you, who I trusted to give me good sound
financial advice put profits before people and guided me towards an
egregiously bad loan which is not only costing me thousands of pounds more
than I would have paid if you had made other options known to me, but also
additional years of payments that could easily have been avoided.

I would like to suggest that the original APR be reintroduced and that the
additional unnecessary Interest that I have paid so far be put towards
paying off the original sum.



Kindest Regards

Thanks again guys!

_Andy_

Nice letter. I love the use of 'egregiously'!

Other than that just need to take out the capital 'I' in 'interest' on the last paragraph.

jonesMUFCforever

You would not have had the same interest rate on the extra £4k as you did for the large loan.
You also cannot fault the bank if you signed something which you did not read or understand.
By all means write your letter but your complaint is not going to be as simple as you think to win.

standupguy

Yes, very good

The only thing I would alter is in the last paragraph - I would amend "I would like to suggest" to " I request"

If you want you could put the following before the last paragraph (there is jargon in there that they will understand and should help to focus their minds that this is a serious complaint): -

I believe that I have been treated unfairly and your staff did not help me to fully understand the features, benefits, risks and costs of raising the extra loan in the way that you proposed and as you will be aware, treating customers fairly is one of the 11 basic principals for regulation of the FSA

jonesMUFCforever

By putting that paragragh in you are seriously putting your case at risk.
Can you prove it?
What if the bank produces a fact find?