APR for membership misleading

Granadalad

A local golf club is offering quarterly payments instead of annual up front payment, stating 7.5% interest added for quarterly payments, but as first payment is on day1 and final payment after 9 months this looks closer to 20% APR. Not sure if they fall under FCA regulation, but is this legal?

powerful_Rogue

Granadalad wrote: »

A local golf club is offering quarterly payments instead of annual up front payment, stating 7.5% interest added for quarterly payments, but as first payment is on day1 and final payment after 9 months this looks closer to 20% APR. Not sure if they fall under FCA regulation, but is this legal?

Think a bit more detail is required for any proper advice.

Carrot007

powerful_Rogue wrote: »

Think a bit more detail is required for any proper advice.

Indeed, like 7.5% over what. Flat interest added up front and no more, or added monthly/daily. Who knows.


How have you worked it out, Has this already aoccured and you know how the took it and worked it out in a different manor?

DoaM

How much is it in one go; how much will you end up paying by making quarterly payments?

Example:

£1000 in one go
£250 per quarter, with 7.5% interest per quarter, payment on 1st day of each quarter:

Q1. Pay £250, £750 remaining, interest £56.25
Q2. Pay £250, £500 remaining, interest £37.50
Q3. Pay £250, £250 remaining, interest £18.75
Q4. Pay £250, £0 remaining, interest £0

Total paid £1,112.50; Equivalent APR 11.25%

So how exactly have they shown the repayment schedule? Do they actually state 7.5% APR? (If they state it like you have in your OP, then they didn't).

PS ... as this is a finance agreement I believe it would fall under the auspices of the FOS?

The_Rainmaker

OP at the end of the day you are dealing with a club.

You have four options.

1. Pay all in one go.

2. Pay their installments as is.

3. Write a letter asking them to clarify their APR and to check if it is correct.

4. Don't join/renew.

Why get all "Is this legal" perhaps you should put yourself forward for the committee to ensure these issues don't happen again.

eddddy

FWIW, I suspect the OP means the payment schedule looks like this:

Annual membership fee due on 1st Jan of (for example) £400

Payment by instalment option is:

• 1st payment of £107.5 on 1st Jan
• 2nd payment of £107.5 on 1st Apr
• 3rd payment of £107.5 on 1st Jul
• 4th payment of £107.5 on 1st Oct

Which is indeed roughly 20% AER / APR

But it doesn't sound like the golf club is suggesting that it's 7.5% APR or AER - so they're probably not doing anything wrong.

I very much doubt they're breaking any regs by offering 2 payment options:

• A single payment of £400
• 4 quarterly payments of £107.5

unholyangel

eddddy wrote: »

FWIW, I suspect the OP means the payment schedule looks like this:

Annual membership fee due on 1st Jan of (for example) £400

Payment by instalment option is:

• 1st payment of £107.5 on 1st Jan
• 2nd payment of £107.5 on 1st Apr
• 3rd payment of £107.5 on 1st Jul
• 4th payment of £107.5 on 1st Oct

Which is indeed roughly 20% AER / APR

But it doesn't sound like the golf club is suggesting that it's 7.5% APR or AER - so they're probably not doing anything wrong.

I very much doubt they're breaking any regs by offering 2 payment options:

• A single payment of £400
• 4 quarterly payments of £107.5

All depends on whether they're authorised by the FCA to be offering consumer credit.

If not then they can have a 3 month rolling membership thats more expensive compared to the annual policy, but they can't have a set up where they're providing an annual membership on credit and charging interest on that "loan".

And of course, they would need to provide a finance agreement following all the rules thats required for an enforceable agreement (ie the total borrowed, total repayable, total interest, interest APR etc).

ETA: also remember that interest chargeable is on the amount borrowed (amount still owed), not the amount of the instalment.

The_Rainmaker

unholyangel wrote: »

All depends on whether they're authorised by the FCA to be offering consumer credit.

If not then they can have a 3 month rolling membership thats more expensive compared to the annual policy, but they can't have a set up where they're providing an annual membership on credit and charging interest on that "loan".

And of course, they would need to provide a finance agreement following all the rules thats required for an enforceable agreement (ie the total borrowed, total repayable, total interest, interest APR etc).

ETA: also remember that interest chargeable is on the amount borrowed (amount still owed), not the amount of the instalment.

I know you are 100% correct but this is a golf club probably working on a shoestring trying to make life easier and more affordable for its members so why do folk have to make life difficult for all concerned.

I revert back to my first post.

If the OP doesn't like it the old adage "Fit in or ............." springs to mind.

Granadalad

eddddy wrote: »

FWIW, I suspect the OP means the payment schedule looks like this:

Annual membership fee due on 1st Jan of (for example) £400

Payment by instalment option is:

• 1st payment of £107.5 on 1st Jan
• 2nd payment of £107.5 on 1st Apr
• 3rd payment of £107.5 on 1st Jul
• 4th payment of £107.5 on 1st Oct

Which is indeed roughly 20% AER / APR

But it doesn't sound like the golf club is suggesting that it's 7.5% APR or AER - so they're probably not doing anything wrong.

I very much doubt they're breaking any regs by offering 2 payment options:

• A single payment of £400
• 4 quarterly payments of £107.5

Thanks to all for replies. eddddy describes exactly the issue I was asking about. I have no problem with this club and my enquiry was only to seek information to offer to them, not to protest indignantly. I understand and agree with options suggested by The Rainmaker and I have served as a committee member already. I wondered if there was a requirement to show the APR as prominently as their 'preferred' rate. However with the risk of good intentions being misinterpreted I think I'll probably keep quiet. Thank you for comments for my personal curiosity.