Unofficial loan advice

mikeyhinde

Not my situation thankfully, but points raised in a pub conversation about a friend-of-a-friend and we were debating the topic as non-experts.  Interested to hear any feedback from those that may be more experienced either as lenders / professionals or having been lender or borrower in a similar spot. 

For the record (to my knowledge) the person lending (Person doesn't have other loans and isn't some sort of loan shark that makes a business of this.  The two knew each other informally prior to the deal.

Person A setting up a new business needed £x,000 and Person B agreed to lend that amount with both parties agreeing a modest interest and 36 equal payments such that it would be fully repaid over a 3 year period.  There isn't any legal paperwork to that end, just a collection of emails & texts confirming the basics of the arrangements.

Person A has met all monthly payments since, in fact overpaying most months and is perfectly happy and capable to repaying the minimum agreed monthly amount until the loan is cleared.

Person B, seemingly with some influence from their partner, have recently sought to change this, seeking earlier repayment and much more onerous interest charges that far exceed the previously agreed repayment schedule.

Having refused to meet these new demands Person B and their partner have taken to regularly showing up at Person A's place of business at odd hours to hand deliver letters / demands, done with a degree of (non-violent) intimidation which has been reported to the police, although there is little in their powers to act - I believe it is just seen as a civil case so not for them to get involved with.  It is logged should things escalate though.

Person B has then seemingly sold the debt to an unregulated debt collection agency that are obviously taking a more aggressive stance in seeking to reclaim the debt, based on the revised amount that includes a significant extra amount of interest that Person B and their partner have tried to change the terms to (from the numbers relayed to me it sounded as if it was north of 50% APR).

My thoughts were that the lack of formal legal contract and trail of text and email exchanges confirming the original agreement, before any money changed hands, would mean that the Person B has no legal recourse here and, even having taken on a (un-)professional debt collection agency there is nothing here that should force Person A to make repayments based on the new terms - aside from the threat / intimidation the formality of a debt collection company may hold on them and the peace of mind to be gained by simply paying up and (hopefully) eliminating the problem.

Person A is more than happy to fully meet the original terms of the loan and so there is no suggestion of them wanting to default - just not wanting to agree to a mid-term change in conditions.

Be interested to understand any views on the legitimacy of such unsecured / unregulated loans and whether Person A is indeed liable to any of the extra clauses or repayments to the debt collection agency.

If nothing else, it remind me why I've always been happy to try and avoid lending or borrowing as much as possible in life, beyond the necessary evil of a heavily regulated building society mortgage!

CliveOfIndia

Since person B is not a licenced or regulated lender, they're on thin ice from the outset.  They can attempt to make what changes to the agreement they want, but if person A is keeping to the terms of the original agreement then there's not a lot they can do.

Even if person A didn't keep up the agreed repayments, person B would still find it very difficult to force them to pay up.  It's no different to the old chestnut about lending money to friends and family.

If push came to shove and person B wanted to take person A to court, if person A is keeping to the original terms as evidenced by a text/email trail, then it's highly likely the court would side with person A.

If I were person B I'd just be thankful that the loan is being repaid, and not be making any waves.  Person A might just decide to stop paying altogether, and in reality there's not an awful lot he could do about it.

MEM62

I think this is just a fantasy situation as some of the story here does not ring true.  A lender cannot change the terms of an unwritten agreement and cannot sell the loan.  Also, the Police would not consider intimidation as a civil matter.     

fwor

MEM62 said:

I think this is just a fantasy situation as some of the story here does not ring true.

Agreed - "Person B has then seemingly sold the debt to an unregulated debt collection agency" is not a credible scenario for a debt which has no formal legal contract.

ManyWays

It does sound invented.  If it isnt then contact https://www.stoploansharks.co.uk/report-a-loan-shark/

mikeyhinde

Thanks for the responses.

As noted, thankfully not me so not directly involved and may have not articulated / summarised with detail but unfortunately isn't invented.

Didn't think as a one-off loan (to our knowledge) it would be seen as a loan shark, had images of that being some sort of shady gangster that did it as a more regular business.  That link does seem to suggest that is what this falls into though so have shared the link and suggested the person involved get in contact with the site for more professional support.

Jami74

Wonder if Person B is declaring the interest as income to HMRC. Wonder what their motivation was for lending the money in the first place. Wonder if the partner of Person B has only recently found out about the loan (potentially their savings) and is upset that it is not earning as much interest as it could be.

Can Person A  get advice from a solicitor? Maybe to write a letter saying that Person A pay will back the original amount borrowed. Maybe the solicitor would write that the loan was an informal agreement and that Person B has no recourse to claim interest or charges. Maybe Person A can get a bank loan to pay back the money borrowed.
Then maybe send the debt collection agency a 'prove it' letter or see if the solicitor can write them an F-Off letter too.
And report any harassment to the police.