Consumer act 1974 and early repayment.

Ems*Honie

Evening

We are trying to make an early repayment on a loan (4 yr loan with 2 yrs left to run) in the agreemant it states that they will charge interest first, then any changes related to sections 2(c) and 2(d), followed by the actual sum borrowed. 'Fair enough.

However, they want us to pay a full insurance charge with its interest on top of the sum left, which is over £1700. This is not included in the agreement as stated above, therefore we dont see that we should pay the full whack, they are insisting its covered by the consumer act 1974 rule 78.

As it is not mentioned in the intial paragragh (as either interest or charges related to 2(c) and 2(d),) are they able to make us pay this in full?

Is the following the right rule? I found it searching this site. The loan company are telling us that this rule states that we must pay the insurance charge in full, but I just dont see where?

Thank you!

78 Duty to give information to debtor under running-account credit agreement

(1) The creditor under a regulated agreement for running-account credit, within the prescribed period after receiving a request in writing to that effect from the debtor and payment of a fee of £1, shall give the debtor a copy of the executed agreement (if any) and of any other document referred to in it, together with a statement signed by or on behalf of the creditor showing, according to the information to which it is practicable for him to refer,—


(a) the state of the account, and

(b) the amount, if any, currently payable under the agreement by the debtor to the creditor, and

(c) the amounts and due dates of any payments which, if the debtor does not draw further on the account, will later become payable under the agreement by the debtor to the creditor.


(2) If the creditor possesses insufficient information to enable him to ascertain the amounts and dates mentioned in subsection (1)(c), he shall be taken to comply with that paragraph if his statement under subsection (1) gives the basis on which, under the regulated agreement, they would fall to be ascertained.

(3) Subsection (1) does not apply to—

(a) an agreement under which no sum is, or will or may become, payable by the debtor, or

(b) a request made less than one month after a previous request under that subsection relating to the same agreement was complied with.


(4) Where running-account credit is provided under a regulated agreement, the creditor shall give the debtor statements in the prescribed form, and with the prescribed contents—

(a) showing according to the information to which it is practicable for him to refer, the state of the account at regular intervals of not more than twelve months, and

(b) where the agreement provides, in relation to specified periods, for the making of payments by the debtor, or the charging against him of interest or any other sum, showing according to the information to which it is practicable for him to refer the state of the account at the end of each of those periods during which there is any movement in the account.

(5) A statement under subsection (4) shall be given within the prescribed period after the end of the period to which the statement relates.

(6) If the creditor under an agreement fails to comply with subsection (1)—
(a) he is not entitled, while the default continues, to enforce the agreement; and

(b) if the default continues for one month he commits an offence.

(7) This section does not apply to a non-commercial agreement, and subsections (4) and (5) do not apply to a small agreement.

I had intended to put this in loans, if a board guide would be kind enough to move me if they feel we're in the wrong place, thanks!

MarkyMarkD

I think they are referring to the "rule of 78", not "rule 78". All "rule of 78" does is specify how interest is calculated on early settlement.

If you agreed to buy the insurance in the first place, it's completely normal that the amount of the insurance is added to the loan and bears interest at the same rate as the loan.

Often the refund due on this type of insurance policy is little, or nothing, if you settle early.

The combination of the two factors above means that early settlement often costs a lot more than you might expect, and this is not necessarily incorrect.