Interest chargeable when none is specified

MRH123

Hi

My late aunt had to go into care, her care fees were paid by the local authority and a charge was placed on her property which was to be settled on her death, the Council had set out various terms including the % interest chargeable and that it would not be charged untill 77 days after death.

following her death it transpires that she had never formally entered into the "Deferred Payment Arrangement" with the council (they had messed up and never received a signed agreement from my aunt) as she never agreed to their terms the council are now charging interest from the date of death as opposed to 77 days later, also they have stated they will use the standard barclays variable rate to calculate interest +1%.

Can anyone tell me in cases such as these what the law states is a reasonable amount of interest to be charged when a rate was not fixed by the 2 parties on commencement of the arrangement, as the council seem to be dictating the terms as they see fit, i am not disputing interst should be paid, simply at what rate it should be charged at.

bris

The Barclays variable rate is fair, it's standard practice to charge interest, so going by a major Banks rate is the fairest way.

bod1467

Late payment interest charges (e.g. for unpaid invoices) are usually 8% plus the Bank Of England base rate, per annum. If the Barclays rate is less than this then good - if it is more then I'd be inclined to challenge it.

paddyrg

With interest rates at an all-time low I don't think this is an unfair offer at all.

MRH123

thanks for the replies, so there is nothing set in law that states the % chargeable in these sort of cases and its for the two parties to agree? or do i have to abide by the local authority's (seemingly) arbritrary decision?

wealdroam

MRH123 wrote: »

thanks for the replies, so there is nothing set in law that states the % chargeable in these sort of cases and its for the two parties to agree? or do i have to abide by the local authority's (seemingly) arbritrary decision?

Well here's a .gov.uk statement on that:

https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt

As mentioned earlier, why would you want to pay over 8% if the council are happy to charge less?

Re-read post #3.

Lomast

As stated 8%+BOE (currently 0.5%) standard rate is the norm so if barclays rate +1% is more than this then you can probably argue the case if its less than 8.5% then you are probably not going to do any better

MRH123

But isnt that purely for a Commercial debt which i dont think this is?

wealdroam

MRH123 wrote: »

But isnt that purely for a Commercial debt which i dont think this is?

I really cannot understand your problem.

Barclays Bank Base Rate is currently 0.5%... the same at the Bank of England Base Rate.

You need to find out whether the Barclays Bank Base Rate is the same as standard barclays variable rate that you mentioned earlier.

Whatever the terminology, you need to know what the rate of interest you are going to be charged.
Get a figure.

The only Barclays variable rate I can find is that relating to mortgages.
On this webpage we are told:

The current standard variable rate for Barclays Mortgages is 4.99%

Is that what the council are referring to? You need to ask them.

What sort of debt do you think you have if it isn't a commercial debt?

I believe that if you went to court for a decision on what the interest rate should be then the answer would be 8.5%... the figure mentioned in post #3.

Hintza

From what you say this interest is payable for 77 days (or an additional 77 days) and it will come out of her estate, not as if it is coming out of your own pocket. At the end of the day it is the executor who needs to sort it out. Are you the executor, if not it really is not your problem.

MRH123

Hi, yes i am the executor, and therefore want to ensure i dont pay any more monies back than i have to, and i can confirm that the local authority wish to charge 4.99% (being barclays variable rate) +1%, so 5.99%.

I have no real problem as such with this figure (5.99%) however i would like to know how they have decided on this without an agreement in place, its seems unfair that they can arbitrarily pick a figure as regards the interest rate, surely i could argue that this has never been agreed and that the interest rate should be the Bank of England rate ie 0.5% which is what i think is fair or we could compromise and meet half way.

I thought there would be a legal precedent for situations like this in which no specific interest rate was agreed to.

as for this not a commercial debt, i dont see how the local authority loaning an elderly person funds to cover her care fees is in anyway commercial?