Charges on payday loans

[Skelly1983]

Hi guys, just a quick query.

 

Over the last year i was stupid enough to have severaql payday loans to which i was not able to pay.

 

First was with MiniCredit which is being dealt with, and sure most people that use this site are aware of the issues with this company.

 

The Second loan is with CFO Lending.

 

Both have issued me with several charges to my account, including missed payment charges and interest charged per day.

 

On this site and others I have seen stated that the amount that people have to pay is "amount borrowed plus one month's interest" I've informed both companies of this to which they say this is not the case, i have tried to do some research on this matter online and have failed to find any other reference to this on any other sites other than forums, this does not appear (from what i can see) within Consumer Credit Act 1974 or any amendments and does not seem to appear under any OFT guidelines.

 

I don't doubt in the slightest that this information is correct but i can find any law that would back up this.

 

Where would i find these laws or guidelines which states this amount of charges applied to accounts?

 

Dont get me wrong I know I am liable to these debts and will pay these back, but I think i should only be paying what is lawful.

[Nao]

As for the interest, the reason it is 1 month interest is relatively simple:

 

With no credit agreement they can't charge you interest, the credit agreement usually ends on the original due date. (unless a rollover was agreed which changes the due date and with it the end date of the agreement).

 

As for the fees, the OFT said so, there is more than one source, example here at page 73: http://www.oft.gov.uk/shared_oft/business_leaflets/general/oft1107.pdf

[Skelly1983]

So even if a payday loan has not been paid the agreement is only up to the repayment date?

 

I had checked that OFT pdf but the only thing I noticed last time i had checked and also on page 73 was:

 

7.15 Imposing unreasonable charges on borrowers in default or arrears.

In the OFT's view, any default or other charges should be transparent and

limited to what is reasonable, doing no more than covering the creditor's

reasonable costs.

 

This seemed a bit vague to me as it does not explain the reasonable cost, for instance I would think that if a member of my staff had to work all day chasing up this account then a reasonable cost would be there wages for that day, also reasonable costs could be included for the electricity used for the member of staffs computer.

[Skelly1983]

I asume as there is a lack of response then that "amount borrowed plus one month's interest" is incorrect.

[26072004]

The new PDL customer charter states they will not add any interest and charges after 60 days. I assume this Charter has been run over by the OFT so do not pay any more than 60 days interest.

 

They may argue your loan was granted before this came into force, but refer them to this form and tell them you consider anything more is unreasonable and stick to your guns.

[Skelly1983]

Thanks for your response.

 

So prior to the new charter, they could apply interest for longer periods?

 

Therefore why is everyone giving the wrong information? these are legal matters that can see people getting in seriose debt because they believe they are within the law when they are evidently not.

[Skelly1983]

Also on page 25 of OFT1107, it says:

 

The principal consequences for the borrower of not keeping up

with repayments

In our view, the risk of the following should be explained to the borrower,

where applicable:

 

• The total cost of the debt growing
  
• incurring default charges and interest where applicable
  

 

These both sugest that that they can apply these charges.

[26072004]

Prior to the new charter it would appear most PDL added interest either.

1. Forever

2. until it got so high it became ridiculous

 

Thats how a £200 loan can get to thousands, they can never take these to court as it would be stuck out due to the high charges but if you add enough charges to enough accounts eventually you will make a profit by collecting on a small percentage of them.

[Skelly1983]

Now this is what i think is the case, and what the loan companies think is the case.

 

What it dont explain is why people looking for advice get told to only pay "amount borrowed plus one month's interest"?

[26072004]

I imagine some PDL companies would accept this as a full and final settlement.

 

And as previously stated above some people think they can only charge interest up to the date the credit agreement ends, NO one has ever posted proof of this as far as I am aware (be happy to be proved wrong) and I cant see how they would be allowed to advertise you will be charges an additional 60 days interest if it was illegal.

[Skelly1983]

This is the point I was making, as i have not found any law that says they cant charge the extra interest.

 

It seems to me that the advice is incorrect and I've spotted it loads of times, users who are in need of help get advised that they can only charge 1 months interest when this does not seem to be correct, they then tell the loan company to get stuffed for the rest and then keep getting charges and interest because they have not cleared the rest, a default could be filled against them and they get a bad credit score and also a very high debt all because they followed the advice on several forums that they only need to pay the loan amount plus 1 month interest.

[Mise Eire]

Theres no written law that states the loan plus one months interest figure as far as i know.

 

However if the loan company take the debtor to court then it seems that 99% ot the time the judge will award this as a final settlement figure. If a payday loans company take a debtor to court then they hope that that person does not offer any defence and hence they can add on any charges they like and will win by default.

[Skelly1983]

If there is no law on this, then the advice should not be given out.

 

They can easily issue a default on the credit file, which is bad enough, all because of poor advice.

[sequenci]

Hello all.

 

The one month's interest advice is incorrect. Default interest and charges can accrue until full performance (i.e. payment) has been made. This is why it is so important to challenge the lenders in accordance with the lending code for small cash advances, unfair relationships as per s140 of the CCA. it may also be possible to make an application for a Time Order - which allows a court to reconsider the interest rate at the same time. The key problem with Time Orders, though, is that an application is expensive (£150) - so maybe only viable for those that qualify for fee exemption, or those that can respond to a lender if they, themselves, commence proceedings.

[Skelly1983]

I've all ways thought this advice was incorrect