When Should Interest Get Frozen?

[ploddingon]

I am trying to help someone who has a few outstanding issues with a well known loan company. This person ran into some difficulties, through an unfortunate change in circumstances, and immediately reported their deteriorating situation to the loan company. The loan company got evidence of everything, all to their own satisfaction, and ultimately agreed to freeze interest on the loan and accept a reduced monthly payment. A default was also applied to the account and no one is complaining about that.

My main concern is that nothing happened for a full 3 or 4 months after all the problems were initially reported and evidence sent in, so a lot of interest was still added on to the debt after this person first ran into trouble. Moreover, it was abundantly obvious that the financial situation of the debtor would certainly not improve in the short term. I know that such loan companies will usually allow for a few months of non-payment before a default is applied to an account and interest frozen, which is standard procedure I am sure. However, should this still be the case if a debtor has proactively contacted them and promptly provided full evidence of their dire situation? In my eyes, if a loan company is going to agree to a resolution with a debtor, then it should be applied as soon as they are aware of the problem. I was going to recommend that this person complains to the loan company, in the hope that interest applied after first contact from them might be refunded, but thought I better seek further advice first. Thank you.

[ploddingon]

Re: When Should Interest Get Frozen?

I know there are no guarantees obviously, but does anyone at least think this is worth pursuing? I was going to try and cobble together something this weekend, if the decision was to proceed.

[stevemLS]

Re: When Should Interest Get Frozen?

A lender is not obliged to freeze interest at all, never mind from a specified date.

By all means complain, you might just get lucky.

[ploddingon]

Re: When Should Interest Get Frozen?

Yes, I know there is no onus on creditors to freeze interest, but from what I can gather it is common industry practise. Besides, it is probably in the best interest of creditors as well, as some debtors might just give up on an ever increasing debt. Furthermore, many debtors might not have much in the way of assets and creditors tend to only look to court as a last resort too. It really does make sense to freeze interest and come to a realistic payment arrangement with debtors who can no longer keep up with their original agreement. I know creditors will say that they only freeze interest after an account has legally defaulted, but nothing is stopping them doing it earlier in certain circumstances. Alternatively, they could keep adding on interest, then subtract the amount they added on after formal contact from the debtor when the debt does eventually default.

Maybe a voluntary default could be introduced into the system in the future to save pointless months of waiting? Just a thought and, as I said, I think it is definitely in the interest of creditors to resolve issues with problem debtors as quickly as possible. If a creditor isn't satisfied that a debtor can no longer satisfy the original agreement, then that is a different story of course. I don't really envisage many cases of people who can pay wanting defaults though. I will help this person communicate with the creditor further, see what comes of it and report back. No harm done.

[FlamingParrot]

Re: When Should Interest Get Frozen?

Yes, I know there is no onus on creditors to freeze interest, but from what I can gather it is common industry practise.

Not as common as you think, even when going through one of the 'official' DMP providers. A few years ago I came across a poster on CAG who'd entered into a DMP and had paid £5000 into the DMP during his first year but his debts had only reduced by just under £500! :scared: :scared: :scared: Yes, that's right, the rest was interest! :mad2: :mad2: :mad2: This was through CCCS (since rebranded as Stepchange)

Maybe a voluntary default could be introduced into the system in the future to save pointless months of waiting?

For what purpose?

Just a thought and, as I said, I think it is definitely in the interest of creditors to resolve issues with problem debtors as quickly as possible. If a creditor isn't satisfied that a debtor can no longer satisfy the original agreement, then that is a different story of course. I don't really envisage many cases of people who can pay wanting defaults though. I will help this person communicate with the creditor further, see what comes of it and report back. No harm done.

Most important is to ensure that any agreement reached is detailed in writing. Another poster on another forum defaulted on a loan in 2000, spoke to the creditor who allegedly agreed to freeze interest and set up a repayment plan.
12 years later he requested a statement expecting the debt to be nearly repaid. To his surprise, he was told he owed over £20,000! :jaw::jaw::jaw::jaw:

It turns out they had been applying interest all along! As he'd negotiated over the phone, he had no paperwork to prove that had been the case. :Cry::Cry::Cry:

[ploddingon]

Re: When Should Interest Get Frozen?

For what purpose?

To save pointless months of interest, charges and waiting for the inevitable.

Most important is to ensure that any agreement reached is detailed in writing.

Good news, some of the remaining balance was agreed to be written off. Evidence was kept of the agreement, but the creditor did what they said and there was no need to chase it up.

[FlamingParrot]

Re: When Should Interest Get Frozen?

Well done! :whoo:

And thanks for coming back with an update. :thumb:

[ploddingon]

Re: When Should Interest Get Frozen?

Well done!

It was a worthwhile exercise, as about £300 got knocked off the final bill. If anyone runs into problems, then I would recommend them contacting all of their creditors immediately. Get that interest frozen and stop those horrendous charges getting piled on top.