Posts
New blog from GLC's Mike Dailly to help consumers become better empowered, avoid being scammed, and save money
19 January 2012
Mortgage 'administration charges' & consumer credit agreements
In the current economic climate many people are finding it tough to pay their mortgage on time, but does that entitle lenders to whack on all sorts of monthly 'administrative charges'?
Many lenders will charge some or all of the following repeat charges:‘Unpaid Direct Debit Fee’ (£25), ‘Arrears Management Fee’ (£50), Late Payment Fee (£25), and ‘Litigation Management Fee’ (£115).
Using the Financial Services and Markets Act, Govan Law Centre recently secured a refund of 75% of these charges imposed on a Glasgow homeowner's mortgage account representing almost £1,000.
We estimate such charges may add up to around £300m across the UK, so this is big business and a lucrative practice. But we believe the law is on the side of consumers.
A legal rule known as 'MCOB 12.4.1' says that lenders must not impose excessive charges which don't reflect actual costs if you fall into arrears.This rule makes it clear that lenders are not at liberty to set up systems that generate additional administration for the purpose of generating a profit. In other words, repetitive and unnecessary charges are not permissible.
This rule applies to a 'first mortgage' - so second secured or consolidated loans are not included. If you've been hit with a lot of repetitive charges complain in writing to your lender making reference to the MCOB rule, explaining your financial difficulties and how these charges are making things worse. If they don't deduct repetitive charges within 8 weeks you can complain to the Financial Ombudsman Service at the link below.
If you have been taken to court for defaulting on a credit agreement - including a 'second charge' mortgage, but not your primary mortgage - there are some powerful statutory rights which can help you.
Section 136 of the Consumer Credit Act 1974 (CCA) permits the court to amend 'any agreement or security' in making a time order under section 129 of the Act as it considers just, having regard to the means of the debtor. That includes the right to ask the court to reduce the rate of interest within a consumer credit agreement.
Most consumers are completely unaware of these rights, which are seldom used, and which can help make spiralling debts, manageable and affordable. The reason these rights are so important just now is because of the big difference between the cost banks and creditors can borrow money at, and what they can charge consumers in interest.
The Bank of England's base interest rate is 0.5% and the standard variable rates of most High Street mortgages are around 2.5% at present. Yet many consumers will have second mortgages (regulated under the CCA) with interest running at 11 or 12%, and unsecured loan and credit agreements running at 18 to 30+% APR".
To give a real example: one of our clients faced repossession through default of a second mortgage of £96,000 at 11.2% APR, resulting in monthly interest payments of £873. Mrs R was eligble for some Jobcentre help with housing costs while in receipt of benefits, but there was a major shortfall. If her rate of interest was 2.5% the differential in monthly payments would be a whopping £674 per month.
So consumers like Mrs R need to think about asking the court to reduce the rate of interest on credit agreements to a lower level so they can meet their financial obligations, and keep their heads above water.
Consumers can make an application under sections 129 and 136 on the 'time to pay' form that comes with court papers, or as part of any legal defence to proceedings raised by a creditor. Always obtain independent legal advice from a local community law centre or local money advice agency - the contact details are below.
http://www.financial-ombudsman.org.uk/consumer/complaints.htmhttp://www.gain4u.org.uk/
Monday, 9 January 2012
Stormy weather & money problems
Stormy weather & money problems
If you've not heard of Glasgow's Govan Law Centre we're in the business of helping people through our free solicitors, projects and campaign work. We're a community law centre which means we're accountable to local people through our Board of Trustees.
This new blog aims to do two things: empower you with practical know-how which can be used in real life to save money or resolve problems, and let you suggest consumer rights issues affecting Glaswegians that we should tackle.
Two topical subjects just now are storm damage and debt. If your home has been damaged by high winds, most building insurance policies will cover you for damage sustained. Likewise comprehensive motor insurance will cover storm damage to your car.
You always need to intimate your claim to your insurer and get telephone consent for emergency work, and always keep receipts. If your insurance company rejects your claim, check your policy, and make a written complaint to them. They have 8 weeks to deal with it, and if they fail to do so, or refuse to pay out, you should complain to the Financial Ombudsman Service – it's free, easy and help on how to do it is here.
What if you don't have insurance? Check if your property factor holds a communal policy which might cover you. If you don't have a policy it will be hard to hold anyone else responsible because even if you can prove someone was negligent the defence of 'damnum fatale' applies, which means because a storm is an inevitable accident it is no-one's fault.
If you have money problems, free help is available across the City from advice agencies funded by Glasgow City Council here. If your debt has been sold on to a 'debt collection company', don't be intimated by threats of being sued in England, you'd need to be sued at your local court, but get free advice and don't let the problem fester.
If the debt is over five years old and has not been raised in court it may have 'prescribed' in law, which means you don't have to pay it. So get this checked. Debt collection companies add on all sorts of charges and fees, and many of these may have no contractual or legal basis, so don't assume these have to be paid.
If sheriff officers contact you with a council tax summary warrant and won't accept a payment plan which is affordable to you, remember you now have a right to apply to the court for 'time to pay' based upon your personal circumstances – free help on how to do this is here.
It's worth checking whether any of your current or old credit or loan agreements came with 'payment protect insurance'. You might be eligible for a refund worth hundreds or thousands of pounds. And you don't need a lawyer or claims management company, you can do it yourself with this free guide from our friends at MoneySavingExpert.
In my next blog I'll explain how you can use new legal rights and arguments to try and get a refund of mortgage arrears charges added to you mortgage account – all for free and without a lawyer!
