CCA REQUEST TO MBNA my journey by Maz

[Sparkie1723]

Just taken this little snippet into the charging of interest on late payment charges etc

Taken from the CCA amendments 2006

 

"In addition, interest on default sums will also be restricted to simple interest.

Failure to comply with the above requirements will impact on an agreement’s enforceability"

 

THis means that when they apply late payment charges to your account ...if they charge you compound interest on it...it "could " make the agreement hard for them to enforce.

 

sparkie

[Sparkie1723]

thats the same question as i was gonna post up Maz.

 

Any way i dont under stand the difference between interest rates and ompound interest so is there somine who can explain it in simple terms for me.

 

Hi GodMother,

 

I'll try and explain in simple terms but someone who works in accounting or a bank would be best qualified, I'll post a couple of simple sums in a few minutes.

 

sparkie

[Sparkie1723]

Hope you can folow these sums???

 

sparkie

 

If a default charge is added to the balance of say £25

The first month interest compounded would be £2025 plus 2% ===£40.50... ..==£2065.50 next month

£2065.50 plus 2% ==£41.31 ====£2106.81 the Act says that simple interest must be applied to the default sum of £25.

The creditor would have to show on your statement this calculation

Balance £2025 contract interest on £2000.………..£40.00 balance £2040

£25 Default charge interest at 2% ===0.50p Balance owing £2065.50.……. Next month it would have to show

Interest 2% 0n balance of £2040 ==£40.80 £2080.40 plus £25.50 ===£ 2105.50 plus 0.50 = £2106.00

 

Instead of £2106.81 people might say its only 81p extra ...not worth arguing about ….but this is only 1 month on one agreement but remember this increases every month and soon you would be paying £2 to £ 3 a month more than you should be.

Consider how much money a credit card bank makes on the thousands who are late…..10 thousand late payers in I month they have made £8000 more than they are legally entitled to

[Sparkie1723]

hiya Sparkie

 

i can see what you are now saying, my head hurts though, but of course its like when you say save, you earn more interest on the compounded part, so interest on interest,

 

is my reasoning becoming a bit clearer, for myself, all i know is that if they have done this, of course the debt increases as months go, as interest is put on interest,

 

so something i must get clearer on, wont havemy pc for the next couple of days but will be back later in the week

 

many thanks def food for thought, i love learning all about this stuff,

 

thanks, done you a tickle...ciao for now maz

 

 

Cheers mate ....it is exactly what you say its interest upon interest ....but they can't apply it to default sums and that includes stuff they add on court claims as further default charges etc, and charge compiud interes on those... that now breaches the New CCA 2006 and would be considered unlawful

 

sparkie