Direct Debit "set up" fee

Shtev

Hi, this is my first post in these forums, although I have been a ready for a long time.

Sorry if this is in the wrong section, if so, please let me know.

I am currently in a finance agreement for my car and it is time to renew. I have opted to hand my car back in and start again on a new finance agreement for another 3 years (I know, not the shrewdest move but it's one that works with my financial situation at the moment).

Now in setting up the new finance agreement and paying via direct debit each month, I have been told that the finance company will charge a £95 one off set up fee.

I was just wondering if they are allowed to do this, or if there is any way around it. It seems a little excessive to me (especially as I am already a customer with them for my current finance agreement).

What would you recommend I do, should I write a letter of complaint, or is this just standard practice and I will have to accept it?

Thank you for your time.

dunstonh

I was just wondering if they are allowed to do this,

yes.

It seems a little excessive to me (especially as I am already a customer with them for my current finance agreement).

What about the work you are creating?

Shtev

Thanks for the quick (if rather blunt) reply. Looks like this is a non-issue then? Something we all need to just accept?

dunstonh wrote: »

What about the work you are creating?

£95 for what is essentially a 1 minute task (if that, and is more likely automated) seems to be excessive. But I guess if that's the way it is, then so be it.

Thanks

dunstonh

Shtev wrote: »

Thanks for the quick (if rather blunt) reply. Looks like this is a non-issue then? Something we all need to just accept?



£95 for what is essentially a 1 minute task (if that, and is more likely automated) seems to be excessive. But I guess if that's the way it is, then so be it.

Thanks

It's not 1 minute. A lot of it is automated now but still requires IT to put that automation in place. Plus you have the credit scoring that needs to be done as well as the broker (dealer in this case) wanting to be paid.

Shtev

dunstonh wrote: »

It's not 1 minute. A lot of it is automated now but still requires IT to put that automation in place. Plus you have the credit scoring that needs to be done as well as the broker (dealer in this case) wanting to be paid.

That's a good point and something I hadn't considered.

Do you know why Mobile Phone Direct debits and other direct debits that I have had set up that have including a credit check (such as my camera which was on finance) have not included a set-up fee?

jamesd

Pick a different finance company.

dunstonh

Do you know why Mobile Phone Direct debits and other direct debits that I have had set up that have including a credit check (such as my camera which was on finance) have not included a set-up fee?

The profit margin in the call charges and packages is much higher than on loans. So, you are paying for it. Just in a different way.

It may surprise you but mortgages (in particular) and loans dont have very good profit margins. The net interest margin is higher when base rate is higher but when its low its a lot harder to turn a profit. Throw in the credit crunch and a more expensive wholesale market and you have to introduce charges or increase the rate to cover it.

AndyinLondon_2

dunstonh wrote: »

It may surprise you but mortgages (in particular) and loans dont have very good profit margins. The net interest margin is higher when base rate is higher but when its low its a lot harder to turn a profit. Throw in the credit crunch and a more expensive wholesale market and you have to introduce charges or increase the rate to cover it.

And the fact that banks can no longer rely on the profit they used to make on PPI, which was what really made consumer lending profitable until a few years ago...