default notice issued after cancelling a direct debit

Josie64

in october hubby cancelled a direct debit to royal sun alliance for contents insurance as we found it cheaper elsewhere.

This morning he has received a default notice under the

Consumer Credit Act 1974 section 87(1)
stating he has breached the terms of the Loan agreement

Q) since when has having a direct debit been classed a loan agreement? we have not borrowed any money from RSA (royal sun alliance)

we have cancelled loads of direct debits in the past and never had a default notice issued, what should he do now? they are wanting £15.39 , yes I know it's a small amount but it is not a loan , it was the monthly direct debit payment for contents insurance.

jambosans

Josie64 wrote: »

Q) since when has having a direct debit been classed a loan agreement? we have not borrowed any money from RSA (royal sun alliance)

I don't know enough about defaults to give a definite answer, however, I would assume that you have in some way breached you agreement with RSA. For example, you agreement with them may require 30 days notice before termination of services, instead you have cancelled your Direct Debit with the bank and not informed them.

Josie64 wrote: »

we have cancelled loads of direct debits in the past and never had a default notice issued, what should he do now?

Wait until someone with more knowledge on the subject gives you more detailed advice. Myself, I would pay it - after checking the terms and conditions.

Josie64 wrote: »

they are wanting £15.39 , yes I know it's a small amount but it is not a loan , it was the monthly direct debit payment for contents insurance.

As far as I am aware, defaults can be issue on a whole range of credit products. If your services were provided one month in arrears from RSA, then that is technically borrowed credit, which is settled each month in full. So cancelling the Direct Debit may have meant that one month of services were not paid for, and they have rather harshly defaulted you on the agreement.

I'm not sure, a default seems "harsh", if not completely incorrect. However I would imagine that you do owe them that £15.39. Why not contact RSA to find out what this is in regards to?

noh

It almost certainly is a loan.

With most insurers, if you want to pay by monthly instalments, you take out a loan which pays the years insurance premium upfront.
The monthly payments pay off the loan with interest.

Check the paperwork you received when you started the policy.

Another point is that cancelling the DD does not cancel the insurance.
Did you call or write to you insurer informing them of your wish to cancel the policy?

noh

Take a look at your policy booklet it probably says something like this from a More Than policy (the online trading name of RSA)

Your policy has a normal insurance period of 12 months and your legal contract with us is for
this period. You may have asked and we may have agreed for your annual premium to be paid
on a monthly basis by instalments under the terms of the Consumer Credit Act 1974.

We reserve the right to terminate the policy in the event that there is a default in instalment
payments due under any linked loan agreement.
If you want to cancel your linked loan agreement but not your policy, you must contact us at
the address given on your schedule. We can then tell you how much you will have to pay for
the rest of the insurance period. If this amount is not paid by the date given in our reply to

you, then all cover under your policy will be cancelled from this date.