Since when does a direct debit become a loan agreement?

edited 30 November -1 at 1:00AM in Insurance & Life Assurance
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jo6677jo6677 Forumite
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edited 30 November -1 at 1:00AM in Insurance & Life Assurance
Last week I took out an empty home insurance policy. As usual I chose to pay by monthly direct debit. I received an email today from Close Brothers setting out the terms for a finance agreement for the loan of the money for the direct debit?! What is this all about, I have never encountered this before?

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  • Faith177Faith177 Forumite
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    jo6677 wrote: »
    Last week I took out an empty home insurance policy. As usual I chose to pay by monthly direct debit. I received an email today from Close Brothers setting out the terms for a finance agreement for the loan of the money for the direct debit?! What is this all about, I have never encountered this before?

    Standard with all insurers when paying monthly they “loan” you the money to pay for the insurance in full you’re then paying it back over 12 months that’s why sometimes if you cancel early you owe the insurer money as your payments won’t cover the amount of time you’ve been on risk

    Has been like this since I started in insurance at 18 some 15 years ago
    First Date 08/11/2008, Moved In Together 01/06/2009, Engaged 01/01/10, Wedding Day 27/04/2013, Baby Moshie due 29/06/2019 :T
  • jo6677jo6677 Forumite
    47 Posts
    Faith177 wrote: »
    Standard with all insurers when paying monthly they “loan” you the money to pay for the insurance in full you’re then paying it back over 12 months that’s why sometimes if you cancel early you owe the insurer money as your payments won’t cover the amount of time you’ve been on risk

    Has been like this since I started in insurance at 18 some 15 years ago


    Hi, well that puts my mind at rest at least thank you. I was wondering what I'd walked into!!
  • csgohan4csgohan4 Forumite
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    jo6677 wrote: »
    Hi, well that puts my mind at rest at least thank you. I was wondering what I'd walked into!!



    It should be in your T+C's, but not money saving to pay monthly as you know
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"

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  • SonOfSonOf Forumite
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    jo6677 wrote: »
    Last week I took out an empty home insurance policy. As usual I chose to pay by monthly direct debit. I received an email today from Close Brothers setting out the terms for a finance agreement for the loan of the money for the direct debit?! What is this all about, I have never encountered this before?

    A direct debit does not become a loan agreement. A direct debit is just a payment facility.

    However, borrowing money to pay an annual premium in installments is a credit agreement.

    Borrowing money to pay premiums on more than 4 payments fell under the consumer credit act many years ago. It was quite informal to begin with but tightened up some years back.
  • jo6677jo6677 Forumite
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    SonOf wrote: »
    A direct debit does not become a loan agreement. A direct debit is just a payment facility.

    However, borrowing money to pay an annual premium in installments is a credit agreement.

    Borrowing money to pay premiums on more than 4 payments fell under the consumer credit act many years ago. It was quite informal to begin with but tightened up some years back.

    Should they have advised me that that was how they were setting it up? They made me pay the first month and admin cost cover and said they would send the paperwork for the direct debit.
  • BoGoFBoGoF Forumite
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    jo6677 wrote: »
    Should they have advised me that that was how they were setting it up? They made me pay the first month and admin cost cover and said they would send the paperwork for the direct debit.

    If you had read what you were agreeing to by paying in instalments then you would have known.
  • SonOfSonOf Forumite
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    jo6677 wrote: »
    Should they have advised me that that was how they were setting it up? They made me pay the first month and admin cost cover and said they would send the paperwork for the direct debit.

    Yes, they should and you would have agreed to it when signed the declaration (which would have been electronically if done online).

    Did you read what you are signing up to?
  • jo6677jo6677 Forumite
    47 Posts
    SonOf wrote: »
    Yes, they should and you would have agreed to it when signed the declaration (which would have been electronically if done online).

    Did you read what you are signing up to?

    Fortunately I haven't signed it yet. I went online yesterday to sort the paperwork and noticed it said credit agreement. I'm still in the cooling off period thankfully but I will still lose £100 set up fee.
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