Loan with Short Term Finance Ltd

lifeisabeach

I recently applied for and received a loan for £100 from Short Term Finance Ltd. The repayments are for £10 a week for 16 weeks. The APR is 2131.77% and the Annual Rate is 195.54, to repay a total of £160.



The problem I have is that the first payment was taken by debit card the following day after receiving my loan. Now I do have friends that have experienced the same and they've told be that it's normal practice for these companies but I don't believe that's normal and if it's actually legal.



Surely if the first payment is taken so early on and providing I make all payments on time the length of the loan will be fully repaid in 15 weeks not 16 weeks and therefore the interest and APR calculations are incorrect?


Personally I would have thought the first payment due would be at least 7 days after I took the loan out in the same way in that with a loan I had over 4 years would be first due at least 28 days after receving the money.


My question is are Short Term Finance Ltd and other companies alike allowed to do this and are my assumptions about the incorrect interest and APR valid?

DCFC79

lifeisabeach wrote: »

I recently applied for and received a loan for £100 from Short Term Finance Ltd. The repayments are for £10 a week for 16 weeks. The APR is 2131.77% and the Annual Rate is 195.54, to repay a total of £160.



The problem I have is that the first payment was taken by debit card the following day after receiving my loan. Now I do have friends that have experienced the same and they've told be that it's normal practice for these companies but I don't believe that's normal and if it's actually legal.



Surely if the first payment is taken so early on and providing I make all payments on time the length of the loan will be fully repaid in 15 weeks not 16 weeks and therefore the interest and APR calculations are incorrect?


Personally I would have thought the first payment due would be at least 7 days after I took the loan out in the same way in that with a loan I had over 4 years would be first due at least 28 days after receving the money.


My question is are Short Term Finance Ltd and other companies alike allowed to do this and are my assumptions about the incorrect interest and APR valid?

So you applied for a loan for £100 ?


Why, just why would you do that ???

Steve975

You are correct this is illegal. Your first payment under this agreement is not due until 7 days after you have received the loan advance. Making payment early (as you have done) actually changes the APR rate on the loan due to the weeks over the payment term which you have stated. It will also effect the rebate terms if the loan is paid early (in the companies favour) . You will find this is standard practice for the ‘not so compliant’ loan companies such as short term finance.

My advice to you would be to call the FCA ASAP and make them aware of this practice and what has happened with your loan. I’m sure they will follow this up. If the company are doing this with customers they will be able to identify it.

poppasmurf_bewdley

Are you sure that this first payment isn't actually a 'fee' from a broker who found you the loan?

sourcrates

Steve975 wrote: »

My advice to you would be to call the FCA ASAP and make them aware of this practice and what has happened with your loan. I’m sure they will follow this up. If the company are doing this with customers they will be able to identify it.

You cannot complain directly to the FCA, its the FOS that deals with complaints, but in the first instance, you should complain to the company concerned about this, as it could be a broker fee of some kind, or an error on their part, either way, it can be sorted with a quick phone call.

Steve975

Sourcrates - I didn’t say the customer should complain to the FCA. What I said was make the FCA aware of the practice, there is a difference.

As someone with knowledge of this industry I can tell you that it’s almost certain that the first weeks payment has been taken at loan issue and the normal response is ‘the customer has requested the payment to be taken’

Any brokers fees (if used) have to be explained to the customer prior to signing the agreement and lifeisabeach has not said this was the case.

lifeisabeach

Thanks for your response guys.

@DCFC79 - We applied for a £100 loan because like lots of families living in poverty we cannot afford to borrow from high street lenders. Ignorance is bliss.

@Steve975 and @sourcrates - Thanks for the information, I have sent a complain via the Financial Ombudsman Service and they are dealing with.

If there's any updates I'll keep you posted.

Steve975

Lifeisabeach - did you get any response back from the FOS or short term finance on your loan and repayment ?