Interest Charges while on DMP

NotGivingIn

My question relates to the type of interest that creditors are allowed to charge to an account on a DMP. While most creditors have stopped charging interest, 2 have not – but they both charge it very differently.
One charges only on the capital, and sends a statement every 6 months showing that the capital has reduced by the payments sent, but advising the interest accrued. It should be noted they bought the debt from the original creditor then successfully applied for a charging order and the judge agreed they could charge interest.

However, the other is charging compound interest – adding interest every month, then calculating the next month’s interest on that higher balance. If no interest had been added, thus debt would be cleared in 5 months, but is actually likely to take at least another 4 years instead.

Are there any rules at all to govern how interest is charged when a creditor refuses to stop it? My DMP provider (Stepchange) has been unsuccessful in persuading them to stop, and do not know the answer to this question. I am hoping there is some rule that I can quote in a last ditch attempt to get them to re-evaluate their charges. If I cannot get them to wipe it out, I would at least like them to re-calculate and maybe stop adding any more going forward. If it affects the answer, this debt came from a storecard with a major high street retailer.

sourcrates

No rules at all I'm afraid.

Technically you have broken the terms of your agreement so the lifting of interest charges is entirely at the creditors discretion.

You could try and argue your case on the balance of fairness and the fact that they are treating you the same as someone who refuses to pay.

National_Debtline

Hi there,

NotGivingIn wrote: »

My question relates to the type of interest that creditors are allowed to charge to an account on a DMP. While most creditors have stopped charging interest, 2 have not – but they both charge it very differently.
One charges only on the capital, and sends a statement every 6 months showing that the capital has reduced by the payments sent, but advising the interest accrued. It should be noted they bought the debt from the original creditor then successfully applied for a charging order and the judge agreed they could charge interest.

This is actually a bit more complicated than it first appears. The creditor would've needed to outline in the original agreement, and the claim form about claiming post judgement interest. If the CCJ was obtained after October 2008 then the creditor would need to send notifications every 6 months under Section 130A of the consumer credit act to claim interest for that period (which it sounds like they are doing).


The claimant would need to sue you separately for this interest, it is not 'added' to the charge as such but becomes a separate thing they can claim. And, I should make you aware, that as far as we are aware, no creditor has ever done this. This is worth noting because you may be able to apply to get the charge removed quicker than you think.


Laura
@natdebtline

NotGivingIn

Hi Laura, Thank you for that information, it is news to me and something I will raise closer to the end date for that one. However, my query was actually based on the other creditor who are charging the interest on a compound basis - ie they are charging interest on interest previously added, month after month. I was hoping that there would be some rule or even a guideline that I can quote in my next letter asking them to be fair. Simply writing regularly and being polite has not moved their stance, nor has pointing out that if they had stopped interest they would soon be able to get me off their books and stop sending me monthly statements through the post. Any reference or precedent that I can include would be a help please.

National_Debtline

Hello again,


I am afraid the creditor is able to add interest and charges as outlined in the terms and conditions of agreement, and if that permits the interest to be added as you have described then I am afraid they are not doing anything they shouldn't be.

All you can do is complain and try quoting some sections of the FCA Consumer Credit Sourcebook (CONC) to them in a hope they will reconsider their current decision. These sections may help you: -


Dealing fairly with customers in arrears or default


CONC 7.3.2 G 01/04/2014


When dealing with customers in default or in arrears difficulties a firm should pay due regard to its obligations under Principle 6 (Customers’ interests) to treat its customers fairly.


B]Note[/B]: paragraphs 7.12 of [URL="https://www.handbook.fca.org.uk/handbook/glossary/G3330.html"][COLOR=windowtext]ILG[/COLOR][/URL] and 2.2 of [URL="https://www.handbook.fca.org.uk/handbook/glossary/G3315.html"][COLOR=windowtext]DCG[/COLOR][/URL


CONC 7.3.5 G 01/04/2014


Examples of treating a customer with forbearance would include the firm doing one or more of the following, as may be relevant in the circumstances:
(1) considering suspending, reducing, waiving or cancelling any further interest or charges (for example, when a customer provides evidence of financial difficulties and is unable to meet repayments as they fall due or is only able to make token repayments, where in either case the level of debt would continue to rise if interest and charges continue to be applied);


Best of luck,
Laura
@natdebtline