Are there any rules about interest rates on defaulted loans?

Wicked_witch

I'll try to keep it short.

In Sept 06 we had to default on an overdraft because of financial problems. We set up a standing order with our new bank to start repaying and managed to obtain an interest rate of 4% because of our low income (after a lot of phone calls etc!).

In sept 07 we changed our payments to a slightly higher rate- £1 more, because they insisted it had to rise- and I changed the standing order payments at New Bank. Unfortunately, they cancelled the so and then re-did it in the same amount (typo I assume). Old Bank called to tell us that the payments were wrong and I got the SO fixed.

What the bank didn't tell us on the phone was that we'd lost the low interest rate and they were now charging 17.5%. As they don't send statements, we were unaware of this until getting a letter yesterday asking us to pay the full amount and realised that it was now higher than when we started paying it off :eek: Including bank charges refunded, we've repayed about £800 (some of which will have been interest) and the total debt still payable is £100 higher than it was when we started.

So, some questions. Is it legal for them to do this without letting us know (I suspect it is, since we did default and it's bound to be in the small print)? If we write them a letter explaining and offering a higher monthly payment for a lower interest rate are they likely to accept (Natwest)? Would we ultimately be better off letting it go to an outside agaent with whom we can arrange affordable repayments? We don't own our home or have anything they could repossess.

I am really upset about this For the last 8 months I thought i was gradually chipping away at this debt and all the time it's been going up. We aren't even entitled to any statments according to them unless we write and ask (which we will) and the unpleasant young man I spoke to yesterday refused to let me speak to someone higher up with whom I might have been able to arrange things more quickly. And yes, he really was nasty, I'm not just being sensitive because i feel stupid (although I do!).

Wicked_witch

Just bumping in case anyone can give advice, especially if you've had a similar situation...

Have decided to go with writing the letter initially, so will be able to decide where to go from there, especially once we receive statements.

Hopeful1

Hi Wicked_witch

I had a similiar problem with Barclays. I made a complaint to FOS. I stressed that B'clays were making it impossible for me to repay my debt with the addition of charges / interest. I have also put in a claim for charges. Within my complaint i enclosed the numerous letters i had sent with a repayment offer, that B'clays had refused. I had continued to make my payment regardless.

B'clays are no longer adding charges or interest and are accepting my payment The charges claim is on hold pending the OFT test case finale.

People were sceptical that FOS would help, but unless you ask..............

Wicked_witch

Hopeful (great name) thanks! FOS- is that financial ombudsmen or similar?

I will follow this course if I get no help from my letter/s then- I am happy to pay back what I owe and to pay interest on it- I did spend it after all!- but there has to be a point where it's fair for both parties...