Horrific missed payment fees

SpikeW

I'd not missed a payment for about 18 months, since I started my car insurance policy with Close Premium Finance. This month everything went pear-shaped and I missed it, so they got a returned DD.

I received a completely psychotic letter from them, complete with default notice, threats, admin fees and everything else. Totally over the top, given that all they had to do was wait 3 days and the money was there.

My questions is this: is there a limit on how much they can charge as "admin fees" for this?

I know credit card companies and banks have limits imposed and wondered if the usual £12 (or whatever it is now) applies to insurance as well, since it's consumer credit.

Any info appreciated!

dunstonh

I received a completely psychotic letter from them, complete with default notice, threats, admin fees and everything else. Totally over the top, given that all they had to do was wait 3 days and the money was there.

Monthly premium car insurance is a credit agreement. It is a loan. They have to comply with the consumer credit act. What you interpret as over the top is likely to be just them warning you of the consequences using legal speak.

When they write to you they dont know the money is there three days away. The fact it is that it wasnt there when you agreed with them that it would be. its as black and white as that.

I know credit card companies and banks have limits imposed and wondered if the usual £12 (or whatever it is now) applies to insurance as well, since it's consumer credit.

That limit only applied to credit cards. Not banks and not other areas. There is no limit. It would just have to be reasonable. As borrowing money to pay your car insurance is priced more to sub prime than prime, you would generically expect a higher fee than normal credit. The lower profit margin would also see costs of a default/arrears likely to have a larger impact.

How much were you charged?

InsideInsurance

Under UK law you cannot have penalty clauses and therefore fees for breaching a contract (eg missing a payment) must be proportional to the cost the business incurs

The prior investigation was on credit cards and after having evidence submitted to them it was deemed that the cost was on average around £12.

There is no rule that a credit card company cannot charge more than £12 as long as that is reflective of their cost but on the basis that they've been investigated in the past it probably isnt worth their while doing this

No other credit providers have been investigated and so its speculation to say that their costs may be higher or lower than a credit card company. I am not an expert on credit but a lot of the theory is inline with insurance and so the fact that insurance premium credit providers are smaller means they lose the economies of scale and the fact that most are purely provide this type of credit means their book of business is very skewed and so proportionally will be more heavily impacted by defaults etc -v- those with a diverse book who can claim a lower capital requirement for the diversification

roonaldo

I'm just wondering what a Psychotic letter about horrific fees reads like.

CLAPTON

SpikeW wrote: »

I'd not missed a payment for about 18 months, since I started my car insurance policy with Close Premium Finance. This month everything went pear-shaped and I missed it, so they got a returned DD.

I received a completely psychotic letter from them, complete with default notice, threats, admin fees and everything else. Totally over the top, given that all they had to do was wait 3 days and the money was there.

My questions is this: is there a limit on how much they can charge as "admin fees" for this?

I know credit card companies and banks have limits imposed and wondered if the usual £12 (or whatever it is now) applies to insurance as well, since it's consumer credit.

Any info appreciated!

what did the letter say?


unlikely to be default notice : what exactly did it say?


how much were the fees etc?

SpikeW

Thanks for the replies: I wasn't disputing the fact that they can inflict an admin charge or trying to pretend I'm in the right or anything. I was simply surprised at the vehemence of their actions for a single slip after 18 months of solid payments.

CLAPTON wrote: »

what did the letter say?
unlikely to be default notice : what exactly did it say?
how much were the fees etc?

It was much like any other default letter, but skipping the first one or two polite reminders and warnings. There was a default notice included, for a single missed payment, which is why I was so surprised. I expected a "tut tut" and a £15 fee or something, not a slap round the head with a large trout!

The fee was £30 for admin. Doesn't sound like a lot, but when my insurance payment is only about £36 a month, it's a big hit!

InsideInsurance

As has been said, with the APRs premium finance companies normally charge they are very much in the sub prime lending space and they take the no nonsense approach that sub prime is well known for.

With APRs often 29.9%+ only the desperate would take it -v- simply using a credit card which normally have a 19.9% or below APR

dunstonh

I was simply surprised at the vehemence of their actions for a single slip after 18 months of solid payments.

As mentioned, it is a loan. You are paying under a credit agreement and that has potential consequences when you fail to meet a payment. They have a duty to make you aware.

There was a default notice included, for a single missed payment, which is why I was so surprised. I expected a "tut tut" and a £15 fee or something, not a slap round the head with a large trout!

They dont have the margins or discretion that the banks will have. I have heard from a rep previously that one missed payment can wipe out the profit of approx 7 cases. I cant verify that but it doesnt sound unreasonable given the margins they operate under. They cannot spend time or money faffing around with discretions. Your post indicates that this is not the first time either (it could be your wording but it suggests you had another one 18 months ago).

SpikeW

dunstonh wrote: »

Your post indicates that this is not the first time either (it could be your wording but it suggests you had another one 18 months ago).

No, I've been with them for 18 months, never had a missed payment with them (or any before). My bad wording.

McKneff

Sorry, I couldn't help but smile at the 'slap around the head with a large trout' x


Thanks for that x


Annie

weejonnie

CPF is a major player in the insurance premium market and many brokers (including myself) use them.

I often feel that they are a corporate finance provider rather than a personal lines provider and their fees are commensurate and hence quite substantial.

If your broker (assuming you are using one) has put you on Close to earn an extra commission (basically any interest over 8% or so is the broker's) when the insurance company has their own scheme available for a lower interest rate, then you need to have a word with them about treating their customers fairly.