Since when does a direct debit become a loan agreement?

jo6677

Last week I took out an empty home insurance policy. As usual I chose to pay by monthly direct debit. I received an email today from Close Brothers setting out the terms for a finance agreement for the loan of the money for the direct debit?! What is this all about, I have never encountered this before?

Faith177

jo6677 wrote: »

Last week I took out an empty home insurance policy. As usual I chose to pay by monthly direct debit. I received an email today from Close Brothers setting out the terms for a finance agreement for the loan of the money for the direct debit?! What is this all about, I have never encountered this before?

Standard with all insurers when paying monthly they “loan” you the money to pay for the insurance in full you’re then paying it back over 12 months that’s why sometimes if you cancel early you owe the insurer money as your payments won’t cover the amount of time you’ve been on risk

Has been like this since I started in insurance at 18 some 15 years ago

jo6677

Faith177 wrote: »

Standard with all insurers when paying monthly they “loan” you the money to pay for the insurance in full you’re then paying it back over 12 months that’s why sometimes if you cancel early you owe the insurer money as your payments won’t cover the amount of time you’ve been on risk

Has been like this since I started in insurance at 18 some 15 years ago

Hi, well that puts my mind at rest at least thank you. I was wondering what I'd walked into!!

csgohan4

jo6677 wrote: »

Hi, well that puts my mind at rest at least thank you. I was wondering what I'd walked into!!

It should be in your T+C's, but not money saving to pay monthly as you know

SonOf

jo6677 wrote: »

Last week I took out an empty home insurance policy. As usual I chose to pay by monthly direct debit. I received an email today from Close Brothers setting out the terms for a finance agreement for the loan of the money for the direct debit?! What is this all about, I have never encountered this before?

A direct debit does not become a loan agreement. A direct debit is just a payment facility.

However, borrowing money to pay an annual premium in installments is a credit agreement.

Borrowing money to pay premiums on more than 4 payments fell under the consumer credit act many years ago. It was quite informal to begin with but tightened up some years back.

jo6677

SonOf wrote: »

A direct debit does not become a loan agreement. A direct debit is just a payment facility.

However, borrowing money to pay an annual premium in installments is a credit agreement.

Borrowing money to pay premiums on more than 4 payments fell under the consumer credit act many years ago. It was quite informal to begin with but tightened up some years back.

Should they have advised me that that was how they were setting it up? They made me pay the first month and admin cost cover and said they would send the paperwork for the direct debit.

BoGoF

jo6677 wrote: »

Should they have advised me that that was how they were setting it up? They made me pay the first month and admin cost cover and said they would send the paperwork for the direct debit.

If you had read what you were agreeing to by paying in instalments then you would have known.

SonOf

jo6677 wrote: »

Should they have advised me that that was how they were setting it up? They made me pay the first month and admin cost cover and said they would send the paperwork for the direct debit.

Yes, they should and you would have agreed to it when signed the declaration (which would have been electronically if done online).

Did you read what you are signing up to?

jo6677

SonOf wrote: »

Yes, they should and you would have agreed to it when signed the declaration (which would have been electronically if done online).

Did you read what you are signing up to?

Fortunately I haven't signed it yet. I went online yesterday to sort the paperwork and noticed it said credit agreement. I'm still in the cooling off period thankfully but I will still lose £100 set up fee.