Confused! Santander consumer finance no longer allow balance overpayments?

SensibleSarah

Just got off the phone to Santander consumer finance. I'm trying to pay off the last few hundred £ of my car finance early so that I can more easily sell my current car and buy a new one which is more suitable to my recently changed needs - so 2 weeks ago I made an overpayment on the balance over the phone.

Rang up today to do the same and was told that I'm no longer able to do so because of a change in legislation that they haven't yet made customers aware of. I can only pay so that my monthly payments reduce, not the term, which of course I don't want. Not only that, but they were unable to process the last overpayment I made against the balance either - so it was sitting on the account doing nothing (apart from losing me interest when it could have been sitting in my ISA) and they hadn't yet made any attempt to contact me in the last 2 weeks to let me know there was an issue in applying it to my balance.

So does anyone know what this change in legislation is that they mentioned? It was always my intention to pay off early, so obviously wouldn't have signed up for a finance deal that didn't allow overpayments. Presumably they can change t&cs when they like - but don't they have to tell me first?

[Deleted User]

I suspect they've misinformed you.

SensibleSarah

It did sound a bit dodgy I thought. I asked him to repeat it twice and then asked questions to make sure that is definitely what he was saying. He put me on hold for a few minutes whilst he went to check with someone but didn't change his story when he came back.

I might ring back tomorrow and see what they say then

Nearlyold

Under the European Consumer Credit Directive which first came into effect February 2011 lenders have to allow overpayments (partial repayments), however the lender can choose whether to offer reduced payments or a reduced term as a result of the overpayment, they do not have to offer both options although they may of course choose to offer both. Don't know where the bit about recent legislation comes into it though - suspect you've been given a confused explanation.

In practice if you make regular overpayments (partial repayments) you'll shorten the actual term you will have to pay for even if the contractual term remains the same because you will have repaid the loan before then end of the contractual term.

You should tell the lender if you wish to make any overpayments (partial repayments) otherwise their system will not know not why the payment has been made and may treat it simply as a payment in advance, which is perhaps what happened in your case
https://www.gov.uk/government/publications/consumer-credit-regulation-guidance-on-the-regulations-implementing-the-consumer-credit-directive-updated-for-eu-commission-directive-2011-90-eu-effective-1-january-2013

SensibleSarah

Thanks! Looks like they have just stopped offering overpayments on the balance then - a change in their policy rather than change in recent legislation like the bloke said. Just annoys me that they took my last overpayment 2 weeks ago without a word about this change - and then did nothing with the money at all despite telling me it would come off the balance at the time, nor have they made any attempt to contact me in the meantime so that I could have it back and earning interest for me.

You're right in that it doesn't really matter in the long term. I'll still pay it off early - but changing my monthly payments every time I made an overpayment would make things more complicated for me to keep track of. I think I'll just wait another month until I have the full amount to pay the settlement.

Nearlyold

For the lender it seems to be easier to reduce the monthly payment than the term after an overpayment, which is why most of them I've worked with only offer the reduced payment option.