Interest charges on a defaulted credit card

Amanna

Hi,

I have a Santander credit card that I defaulted on in 2015, due to unemployment. I have been slowly paying it off, and only have a few hundred pounds left to go. When I was looking through my online statements recently, I realised that they had continued to charge me interest for at least three months after I defaulted. Can they legally do this? I've tried to find the answer online but have come up empty handed.

Thanks in advance.

D3xt3r5L4b

Why do you believe they shouldn’t?

born_again

When you say after you defaulted.
Is that when you stopped paying them. Or when they blocked the account?
As a default will be from when they list it as a default. Not when you stop paying them.

Amanna

born_again said:

When you say after you defaulted.
Is that when you stopped paying them. Or when they blocked the account?
As a default will be from when they list it as a default. Not when you stop paying them.

from when they sent me an official default letter and registered my account as defaulted with the credit reference agencies.

Amanna

*BUMP*

Does anybody know if banks are allowed to continue charging interest after they send a legal notice of default? Any advice would be welcome.

molerat

Yes they can.  The FCA handbook states they should show forbearance and consider not charging interest and they generally do stop but they do not have to. https://www.handbook.fca.org.uk/handbook/CONC/7/3.html

sourcrates

molerat said:

Yes they can.  The FCA handbook states they should show forbearance and consider not charging interest and they generally do stop but they do not have to. https://www.handbook.fca.org.uk/handbook/CONC/7/3.html

That section of the FCA handbook only applies to arrears and default sums, not defaults on credit files, don`t worry, its a common mis-conception.

There are two kinds of default -

(A) You can be in arrears, yet still owing a default sum.

(B) Then there is the default placed on your credit file by the creditor.

.

With default sums, a creditor can still charge interest if they wish, as the account is still live and active.

Once an account defaults, that is it, the financial relationship has ended, the date of default will show on your credit file, and all interest and charges MUST stop on that date, the debt is frozen from then on.

If your account is regulated by the consumer credit act, then before a creditor can -

• Demand the balance in full
• Sell or pass the debt to a collection agency
• Start court action
• Start proceedings to repossess anything that forms part of the agreement (for example a car that is part of a hire purchase agreement)

The creditor can only carry out these actions after the account has defaulted.

Yahoo_Mail

sourcrates said:

molerat said:

Yes they can.  The FCA handbook states they should show forbearance and consider not charging interest and they generally do stop but they do not have to. https://www.handbook.fca.org.uk/handbook/CONC/7/3.html

That section of the FCA handbook only applies to arrears and default sums, not defaults on credit files.

There are two kinds of default -

(A) You can be in arrears still owing a default sum.

(B) Then there is the default placed on your credit file by the creditor.

.

With default sums, a creditor can still charge interest if they wish, but, once an account defaults, that is it, the end, the financial relationship has ended, the date of default will show on your credit file, and all interest and charges MUST stop on that date, the debt is frozen from then on.

I've yet to see any evidence that interest can't be charged on a defaulted debt.  Even StepChange says "In practice, most creditors stop interest and charges once your debt has defaulted, or has been passed to a debt collection agency. It’s not common for charges on a debt to continue increasing over a long time."

sourcrates

Interest can only be charged if the original agreement allows it, if there is a specific clause in that agreement that allows for post default interest and charges to be added, most CCA regulated agreements do not allow for this.

As a rule of thumb, all CCA regulated agreements operate in a similar manner, wherby once a default is applied, the balance is frozen at that point,

The FCA handbook is only guidence, and different creditors may interpret things in different ways, but it will always come down to what is written within the terms of the agreement you signed.

Yahoo_Mail

sourcrates said:

Interest can only be charged if the original agreement allows it, if there is a specific clause in that agreement that allows for post default interest and charges to be added, most CCA regulated agreements do not allow for this.

As a rule of thumb, all CCA regulated agreements operate in a similar manner, wherby once a default is applied, the balance is frozen at that point,

The FCA handbook is only guidence, and different creditors may interpret things in different ways, but it will always come down to what is written within the terms of the agreement you signed.

So they can charge interest then.  Glad we cleared that up.

sourcrates

Yahoo_Mail said:

sourcrates said:

Interest can only be charged if the original agreement allows it, if there is a specific clause in that agreement that allows for post default interest and charges to be added, most CCA regulated agreements do not allow for this.

As a rule of thumb, all CCA regulated agreements operate in a similar manner, wherby once a default is applied, the balance is frozen at that point,

The FCA handbook is only guidence, and different creditors may interpret things in different ways, but it will always come down to what is written within the terms of the agreement you signed.

So they can charge interest then.  Glad we cleared that up.

No they can`t, not on a CCA regulated debt.

I`ve not seen an agreement yet in 25 years that allows this.

In practice, most creditors stop interest and charges once your debt has defaulted or has been passed to a debt collection agency, CCA regulated or not.

It’s not common for charges on a debt to continue increasing over a long time.