Interest on late payment (consumer)

RandomUserID

Sandtree said:

Vizard said:

user1977 said:

Vizard said:

I suspect that their T&Cs DO mention interest rates.

You're the only person here who can read them..

Just checked and it says "up to 1.5%". They clearly are choosing to threaten the full rate.

As I suspected, however, I have received advice elsewhere that they can put what they want in their contract, it doesn't mean a court will award it. They have to demonstrate that it is a genuine pre estimate of their costs; which I doubt they can do. It must also not be a penalty.

And about a number of times here as well.

It must be proportional to the cost to them so if they've had to put things on credit cards or paid late payment fees to factoring companies etc then these could all exceed 1.5%. Cost can be done on an averaging basis too.

Why would it have to be proportional?  Do credit cards have to be proportional to the cost?  Loans?  Seems like we've missed a trick with payday loans then, all those that couldn't argue the loans were given "irresponsibly" could just argue that the interest rate isn't proportional.

Sandtree

RandomUserID said:

Sandtree said:

Vizard said:

user1977 said:

Vizard said:

I suspect that their T&Cs DO mention interest rates.

You're the only person here who can read them..

Just checked and it says "up to 1.5%". They clearly are choosing to threaten the full rate.

As I suspected, however, I have received advice elsewhere that they can put what they want in their contract, it doesn't mean a court will award it. They have to demonstrate that it is a genuine pre estimate of their costs; which I doubt they can do. It must also not be a penalty.

And about a number of times here as well.

It must be proportional to the cost to them so if they've had to put things on credit cards or paid late payment fees to factoring companies etc then these could all exceed 1.5%. Cost can be done on an averaging basis too.

Why would it have to be proportional?  Do credit cards have to be proportional to the cost?  Loans?  Seems like we've missed a trick with payday loans then, all those that couldn't argue the loans were given "irresponsibly" could just argue that the interest rate isn't proportional.

Yes... dont you remember the big hoohaa a few years ago about the £50 fees that credit card used to charge for late payments, over limit etc? Hence they all dropped them to circa £20 as that was deemed an appropriate level based on cost.

You need to differentiate the clauses that are there that cover the doing the agreed service and those that cover breach of contract or otherwise failing to meet your obligations. So, Knee Breaker Loans can offer a 500% APR for a loan as thats the basis of the service, you receive £100 and have to pay back £600 within a year. They cannot then charge a £1,000 fee for late repayment or increase the interest to 5,000% because you've failed to make your repayment on time.

They could try and be more clever and rather than saying its a 12 month loan say its an open ended loan and if you repay in 12 months APR  is 500% and if you choose to take longer its 5,000% - which is what some buy no pay later deals do.

In basic English common law there is no recognition of punitive damages and this was reinforced by the House of Lords in Dunlop Pneumatic Tyre Co Ltd – v – New City Garage [1915] where the contract had a single fixed cost for any breach and the Lords (prior to the Supreme Court existing) stated that the amount, despite being in the contract, was disproportion to the loss caused by the actual breach in the case and therefore punitive and not allowable.

bris

Taken from the .GOV.UK website

Interest on late payments

The law on late payment means you can charge interest to businesses (but not consumers) as soon as their payment is late.

So no you cannot charge interest to consumers on late payments.

Bit of an edit to this though so the above might be a bit misleading and not as accurate as the GOV website implies.

There are a few specialist law firms that state interest can be charged to consumers if it's in the contract, but it is limited

"The interest and charges that can be added to consumer debts will be limited."

Not exactly sure how limited and how it's worked out as the statement ends there.

They explain how to calculate B2B interest and charges but not consumer.