Early settlement

hailsham

I took out a loan with my bank (Natwest) in November 2009, repayable over 36 months.

I have just asked for a settlement figure, which turned out to be more than the outstanding balance on the account.

At the bottom of the letter from Natwest it says:

"There is no entitlement to rebate of the charge for credit under Section 95 of the Consumer Credit Act 1974 or under the agreement"

I phoned Natwest and was told that, not only was there no rebate, but I had to pay 58 days interest as a penalty for early settlement.

I don't understand this as The Consumer Credit (Early Settlement) Regulations 2004 say:

2.—(1) Subject to the following provisions of this regulation, the creditor shall allow to the debtor under a regulated consumer credit agreement a rebate at least equal to that calculated in accordance with the following provisions of these Regulations whenever early settlement takes place ....

Natwest seem to be ignoring the regulations. How do they get away with it?

There is nothing in my copy of the agreement about penalties.

Tixy

Well you wouldn't expect to pay less than the outstanding balance surely?

It should be less than the total amount of remaining payments though.

CLAPTON

give us the figures

jonesMUFCforever

I bet your copy of the CCA agreement you signed has details about the early settlement charge.

You only have a case if you asked BEFORE you took out the loan and they said no to any ESF's then you could argue that it would be unfair to charge it.

There are ways around it by paying most of the loan off in a lump sum (If Nat West allow this) then letting the last payment go through normally by D/D.

zppp

hailsham wrote: »

I took out a loan with my bank (Natwest) in November 2009, repayable over 36 months.

I have just asked for a settlement figure, which turned out to be more than the outstanding balance on the account.

At the bottom of the letter from Natwest it says:

"There is no entitlement to rebate of the charge for credit under Section 95 of the Consumer Credit Act 1974 or under the agreement"

I phoned Natwest and was told that, not only was there no rebate, but I had to pay 58 days interest as a penalty for early settlement.

I don't understand this as The Consumer Credit (Early Settlement) Regulations 2004 say:

2.—(1) Subject to the following provisions of this regulation, the creditor shall allow to the debtor under a regulated consumer credit agreement a rebate at least equal to that calculated in accordance with the following provisions of these Regulations whenever early settlement takes place ....

Natwest seem to be ignoring the regulations. How do they get away with it?

There is nothing in my copy of the agreement about penalties.

The loan incurs interest on a monthly basis, it is not front loaded, so you don't get a rebate for paying off early. The settlement figure will be the balance + pending month's interest + 1 month penalty for early repayment.

And it is in the agreement, look for something that talks about 58 days and early settlement.

KathysBoy

They are entitled, under the Consumer Credit Act to give you a settlement figure plus 58 days interest, HOWEVER, this means the settlement figure is then valid until the date of the quote plus 58 days, less any payments you make. so, it's only a penalty if you pay it staright away. If you leave until day 58 (or a day or so before) and then pay it by debit card there's effectively no penalty.

Not sure why you're not entitled to a rebate, unless it was an exempt agreement, which I think essentially relates to loans for property related transactions. you can find details on the net

hailsham

I've seen where I was going wrong!

I was thinking that the current balance included future interest, I should have realized that is not the case. The difference between the current balance and the settlement figure works out as 58 days interest. However there is no mention of this charge anywhere in my copy of the loan agreement.

Despite the "penalty" I will still save several hundred pounds in interest by settling early.

Thanks for your help.

jonesMUFCforever

Are you going to try my tip to see if you can save money?

Pay a lump sum off the loan - let it go through so say a week later ask for a settlement figure - if there is any ESF it will based on a very small amount ie pennies not ££££'s.

hailsham

jonesMUFCforever wrote: »

Are you going to try my tip to see if you can save money?

Pay a lump sum off the loan - let it go through so say a week later ask for a settlement figure - if there is any ESF it will based on a very small amount ie pennies not ££££'s.

I suppose there no harm asking them what happens if I make a lump sum payment.