legality of payday loan post termination interest

[miliitant]

i thought i would put this question to the forum to get some educated replies

we all know that most people are unable to pay back their payday loans at the end of the month, the lender then tries to screw them at say 5000 % interest etc, so the debtor is never able to clear

THIS IS MY QUESTION

PAYDAY LOANS ARE SHORT TERM LOANS, 30 DAYS
THESE LOANS THEN TERMINATE SO SECTION 87 OF THE CCA 1974 DOES NOT APPLY
(THE NEED FOR A DEFAULT NOTICE)

so as the agreement has run its course of 30 days and finished, can the payday lender still add post contractual interest

i am of the opinion that all the payday loan lender can lawfully demand is the principle sum borrowed and the one months interest

unless

the borrower has agreed to extend the agreement via a rollover for example

comments please

[Bill-K]

Re: legality of payday loan post termination interest

S.87 seems to be the requirement to serve a DN before certain action is taken - as opposed to the right to continue charging contractual interest on any outstanding balance after the original loan term has expired. I look at it this way. If a loan term is contractually 10 years, then if it is not paid after the 10 years, the lender still has the right to carry on charging contractual interest on it until it is settled, I believe - and a loan term of 30 days would give the lender the same right. JMHO, though, of course. DavyB might be good here.

[labman]

Re: legality of payday loan post termination interest

It depends what the contract says. Usually,according to the contract, they can continue to charge interest, but according to the CCA, only simple interest can be charged on default sums and the rate cannot be increased.

I suspect a court wouldn't uphold repayments amounting to more than the sum borrowed on this sort of loan - they don't have a good track record. Of course Section 140 also comes into play.

OFT Guidance is unhelpful as it is not intended for such loans. Nothing I know of in Statute stops the charging of the interest, but to date courts have been on our side. They need regulating!

[miliitant]

Re: legality of payday loan post termination interest

I read someware that a default notice, not default sums is only valid for an agreement three months and over, i cant confirm but it is in the back of my mind

[labman]

Re: legality of payday loan post termination interest

It is the usual practice - 90 days, but the second you miss a payment, technically you are in default. Not all firms abide by good practice as I know you know!

[Guest]

Re: legality of payday loan post termination interest

Hi

Repeating what labman says , it depends what is in the agreement(similar to any other loan).
DN's are not needed after termination although LBA's are, and usually they send a DN.

Although contractually they are allowed to charge these rates, practically it is doubtful that a court would enforce them over a protracted period.

D

[Guest]

Re: legality of payday loan post termination interest

Regarding rollover's the subsequent agreements would come under section 82 of the act as modifying agreement.

Hopefully there will be legislation introducing caps on the total charge for credit as they do in other counties, this should stop them charging any post termination interest.

D

[legalese]

Re: legality of payday loan post termination interest

Militant, if people are unable to pay these payday loans back what would you recommend they do? As you say above people would be accumulating more and more interest keeping them in debt. I would be interested in hearing about all these sections that are mentioned. Yes im back

[labman]

Re: legality of payday loan post termination interest

Militant, if people are unable to pay these payday loans back what would you recommend they do? As you say above people would be accumulating more and more interest keeping them in debt. I would be interested in hearing about all these sections that are mentioned. Yes im back

The very first thing people should do is phone their bank and cancel the Recurring Payment Authority. They should then follow up this cancellation in writing, ideally recorded delivery, and requesting a reply from the bank saying it has been cancelled.

Have a read of the CCA - these sections are reasonably straightforward unlike other bits. The normal advice is to pay back only what was borrowed in the first place at an affordable rate. The payday loan company should be told you have completed a Common Financial Statement (Income and Expenditure) and that the amount offered is all you can afford. You should then yourself, or through a debt advisor, ask for all interest and charges to be frozen. There is increasing pressure on these companies to do this.

If they keep charging interest, once the amount borrowed has been repaid stop paying. Make it clear you're willing to pay a sensible amount of interest, but not the astronomical amounts they charge. Usually at this stage an agreement can be reached.

The most important thing first though is to cancel the Recuuring Payment Authority, otherwise they can, and will empty your bank account every time money goes into it. Not so long ago you had to move to an unrelated bank to avoid them doing this.

[legalese]

Re: legality of payday loan post termination interest

Sounds good, but by doing so you have created controversy and can take you to claims court, all thats happening here is renegotiating to which they will win, example...you stop payments and negotiate a smaller payment, they refuse and say this is how much we will accept, goes on and on. If agreement has not been made then they can begin claims and you have no leg to stand on as once in default is all the judge needs and you pay pay pay.

[labman]

Re: legality of payday loan post termination interest

That is not my experience in reality, but it sounds as though you have different experiences of them?

[Guest]

Re: legality of payday loan post termination interest

That is not my experience in reality, but it sounds as though you have different experiences of them?

Legalese has different experiences to everyone.

D

[miliitant]

Re: legality of payday loan post termination interest

Then please tell us your experience legalese

thats the whole point of this thread

JUDGE LOTTERY ALSO PLAYS A PART

knowledge is power

[legalese]

Re: legality of payday loan post termination interest

Legalese has different experiences to everyone.

D

Il leave that to you davyb you seem to love sections hahahaha

[legalese]

Re: legality of payday loan post termination interest

No sorry i cant lol Davyb please explain the legality of these payday loans and how do we get out of them? Regarding missed payments which the payday loan companies love especially if your not educated into the scam thats going on behind the scenes.