58 Days Additional Interest

MPN1971

Having just repaid a loan in full to Kia Finance I have just been told that legally I can be charged an additional 58 days interest beyond the date I repaid the loan! That is paying 58 days future interest on a sum that has already been repaid. Apparently every loan company is ‘entitled’ to charge customers this even though it is not listed in the agreement. It is enough that it is embedded in the Consumer Credit Act they say. Why do loan companies not have to declare this additional fee upfront?

PeacefulWaters

Read your terms and conditions booklet. It's in there.

jonesMUFCforever

MPN1971 wrote: »

Having just repaid a loan in full to Kia Finance I have just been told that legally I can be charged an additional 58 days interest beyond the date I repaid the loan! That is paying 58 days future interest on a sum that has already been repaid. Apparently every loan company is !!!8216;entitled!!!8217; to charge customers this even though it is not listed in the agreement. It is enough that it is embedded in the Consumer Credit Act they say. Why do loan companies not have to declare this additional fee upfront?

How can they determine the date you may repay the loan to quote you a fee upfront?
The part about the early settlement fee will be on your CCA agreement.

Nearlyold

All is explained here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34687/12-1264-consumer-credit-directive-guidance.pdf

In particular paragraphs 14.39 and 14.40 on page 67

When a customer requests a full or partial early settlement the lender has to calculate a rebate of the interest charges that would have otherwise been charged if the loan had continued as before. In calculating this rebate the assumed date of the full or partial early settlement is 28 days after the request, or 58 days after (at the lenders discretion) if the loan has more than 12 months to run.


The customer then has 28 or 58 days in which to make the payment, if they make the payment earlier than the 28 or 58 day deadline the lender does not have to adjust the rebate of interest calculation already made, the customer is simply giving the lender some free working capital for a period.

Some lenders don't make the charge however those that do will have included details in the Terms and Conditions by referencing the early settlement regulations.

D_M_E

If you paid via instalments, for example 48 monthly payments and made the last of the 48 then you should have no more to pay, that is it job done.

If, however, you contacted them and asked for an early settlement figure which you then paid then they are within their reghts to charge you an additional few days interest, BUT I would have thought that this would be included in any settlement figure quoted, not as an addition AFTER the customer has paid what was asked.

Possibly a written complaint and escalation to the FCA might be in order.

Nearlyold

If the OP asked for a settlement figure it would definitely have been calculated with an assumed date of settlement 28 or 58 days after the date of the request. I don't think the OP is necessarily saying that the lender asked for the 58 days interest after he settled, its probably that the OP has just realised the settlement figure included it.
Having said that, a possible way it could happen is someone thinking the current balance was the settlement figure and paying that over to the lender without asking for a settlement figure first.