Admin Charges on Loans

Ooragnakuk

Has anyone got any advice on how to reclaim the excessive charges imposed by Finance Companies?

Shortly before Christmas my 85 year old father got a settlement figure for the last 6 months of a 5 year loan he took out for some home improvements.

He remembered to cancel the direct debit but forgot to post the cheque.

His first mail of the New year was two letters from the company saying that the direct debit had not been paid and that he was now subject to a £20 admin charge.

His second letter was very similar but imposed a £22.50 recovery charge on the missed payment.

We rang the lender but under no circumstances would they waiver this £42.50 of charges or even offer an early settlement rebate.

In fact I found the company very cold hearted.

Fortunately he has a friend who is a solicitor who is looking at the case but in the mean time any tips?

Regards

Ooragnakuk

Xbigman

Its possible the way they are working out the settlement figure there is no rebate this late in the loan, so in effect no point settling early. Possibly he should have just made the normal payments and earned interest on the money he had in the bank for 6 months. Sorry that doesn't help him but might help others.

As for his current problem, if he has cancelled payments and not settled it is ultimately his own fault. Where as those charges look naff they are really quite reasonable in todays market. But I don't think they are the real problem.
If he has missed a payment he is now in arrears and they will add interest on that could potentially dwarf that 42.50. He needs to bring the account up to date immediately by making that payment. Then contact them and find out the current balance and how that figure was arrived at. Then get back to us.
Regards



X

Astaroth

The fees applied are for breach of contract and therefore under contract law cannot be punitive and so must reflect the true cost incurred by the lender for the breach.

The OFT presently have only investigated costs for credit cards and they came back with the finding that the cost should be £12 or less. Whilst people are trying to apply this finding to other banking products it is certainly possible that a creditors costs for breach of contract may be different for loans than for credit cards due to the differing legislation/ regulation that applies.

As he has a solicitor involved they should be the ones to advise if they feel the OFT's findings on credit cards is close enough an approximation to argue that the fees are punitive or if it is too diverse and therefore an alternative estimation needs to be made

Rafter

Ooragnakuk,

A bank applying an automatic penalty fee for an overdraft infringement or late payment on a credit card will indeed cost a lot less than £20 per occassion which is why it is unlawful.

However with a loan company having to chase payments it could well have cost them £20 in staff time and expense making contact with your father etc etc.

The OFT said as much when they recognised that credit card providers which used direct debits as a matter of course (such as Egg) may well have costs and therefore penalty fees about the £12 threshold level.

It was his error not posting the cheque and although your principles are valid it is probably not worth pursuing on this occassion. I don't think you will get the result you want and will probably end up wasting your time and that of your solicitor friend.

R.

Ooragnakuk

Thanks for your input. The advice from the solicitor is as follows;

1 - Write and complain - obviously laying out the situation and as someone pointed out mention that he OFT deems anything above £12 excessive and unfair - I know it relates mainly to credit cards but is now being widely used as the norm.

2 - Then assuming and unfavourable reply ask for their internal complaints procedure and persue through this channel.

3 - The final step if still unsuccessful (taking it to the court wouldn't be worth while) is then to flag it up to the FSA and Financial Ombudsman within 6 months.

Once again thanks.

regularsaver1

complain that he made an error?

he should not have stopped the payments until he had confirmation and receipt of the cheque and settlement

Ooragnakuk

Just to keep you all informed!

Two weeks ago I wrote to the Loan Company about the charges they imposed on my father's account - using words recommended by his solicitor friend.

This morning he received a reply to say that the £42.50 would be refunded as a gesture of goodwill.

Thanks for your views on this matter but it shows that it does pay to challenge these issues.

:T