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i know the halifax level of intrest is now set a £1 a day on my overdraft

 

however i was looking through the consumer credit act and found this

 

Extortionate credit (ss.137-140 of the Consumer Credit Act 1974 )

 

This concept has been replaced by the idea of an "unfair relationship". An “unfair relationship” could include the terms of an agreement, the ways in which enforcement is being carried out, or anything else. The new rules are retrospective and will make lenders responsible for the transgressions of their brokers, even when these do not fall within the antecedent negotiation rules.

 

The method is the same as for extortionate credit, and there is no doubt that anything that is extortionate will also be an unfair relationship, but hopefully a lot more will be.

 

Any Court can re-open any credit agreement, whether regulated or not, where it considers that the bargain was an unfair relationship. The debtor must raise the matter and it is for the creditor to rebut it (s.171).

 

In terms of unfair APRs. three of the successful cases at County Court level are :

 

Barcabe Ltd v. Edwards (1983) CCLR 11, where the lender had charged 100% flat rate per annum (APR 381%), other organisations would have charged only 20%, the lender took no exceptional risk, and the debtors were ignorant and illiterate. The Court substituted a 40% rate.

 

Castle Phillips & Co -v- Wilkinson and Wilkinson (1992) CCLR 83, where the lender, through brokers, provided a bridging loan of £21,000 for a period of between 4 and 6 months at 4% per month. It was held that the credit bargain was clearly extortionate because the interest rate was 3.33 times what a building society would charge, the security provided exceeded the nominal amount advanced, the borrowers were of little financial understanding, and had been persuaded to enter into an agreement which in normal circumstances they would not have entered into. The Court substituted a rate of 20% per annum, being the current building society re-mortgage rate plus one third to reflect the short-term nature of the loan.

 

London North Securities Ltd v Meadows (2005) which was confirmed at appeal, where the lender charged £50 for every arrears letter and added this to the loan balance, which was being charged at 36.9% APR. It was held that this was extortionate since the charges levied did not represent the lender's costs over the arrears. However, the original loan was held not to be extortionate.

 

 

could someone calcualate me the intrest rate for an overdraft of £300 for a year with £365 intrest added on

 

it would probably come under extortionate wouldnt it... is it worth following up on?

Please note:

 

  • I am employed in the IT sector of a high street retail chain but am not posting in any official capacity,so therefore any comments,suggestions or opinions are expressly personal ones and should not be viewed as an endorsement or with agreement of any company.
  • i am not legal trained in any form.
  • I have many experiences in life and do often use these in my posts

if ive been helpful kick my scales, if ive been unhelpful kick the scales of the person more helpful :eek:

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Please note:

 

  • I am employed in the IT sector of a high street retail chain but am not posting in any official capacity,so therefore any comments,suggestions or opinions are expressly personal ones and should not be viewed as an endorsement or with agreement of any company.
  • i am not legal trained in any form.
  • I have many experiences in life and do often use these in my posts

if ive been helpful kick my scales, if ive been unhelpful kick the scales of the person more helpful :eek:

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sorry this is already in the halifax board but i dont seem to be getting any replies so ive reposted

 

as your aware the halifax charges on overdrafts are now at £1 a day for amounts under 1500, ive got an overdraft of £300 which i am now paying £365 a year in intrest.....

 

first question can someone give me the forumula to work out what apr that is ive fogotten all my olevel maths as ive nearly never used it.

 

second question there used to be a law on excessive intrest charges is that still in force ive dug up a quote on the halifax board but cant find anything else about it

 

thirdly once ive worked out hte intrest charges on the above can someone give me a wink or nod on if these are likely to be classed as excessive

Please note:

 

  • I am employed in the IT sector of a high street retail chain but am not posting in any official capacity,so therefore any comments,suggestions or opinions are expressly personal ones and should not be viewed as an endorsement or with agreement of any company.
  • i am not legal trained in any form.
  • I have many experiences in life and do often use these in my posts

if ive been helpful kick my scales, if ive been unhelpful kick the scales of the person more helpful :eek:

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An APR is only useful for comparing loans because it includes ALL charges that are paid and the idea is to make it a level playing field for comparing companies.

 

What you should be more interested in is the flat rate, that is the true cost of borrowing, to calculate that you need to add up all the payments you will make and then deduct from that the amount of money you borrowed and then divide whats left by the amount you borrowed then multiply that by 100 to get the flat rate. (if it's for periods longer than 12 months then you need to divide the total interest by the number of years of the loan)

 

eg You borrow £100 and you pay back £10 a month for 12 months, so the total you pay back is £120, after you deduct the sum you borrowed (£100) you have paid £20 in interest, so your flat rate was 20%, ie £20 for every £100 that you borrowed.

 

With an overdraft it wont work like that because you have a fixed fee of £1 per day regardless of whether you are £5 or £300 into that overdraft, so it's not an interest charge per se it's more of a service fee.

 

What you need to ask yourself is it it worth £1 a day for the overdraft, nobody else can answer that for you.

 

However if you took a loan of £300 and it was for 12 months and you got a typical bank loan of 7% you would pay £21 in charges, so the daily rate repayment would be 88p, the important thing to note is that you are also paying back the original loan of £300 here, whereas with an overdraft fee you ARE NOT paying the capital sum back, you are simply paying a flat fee, so even after paying back £365 in charges at the end of the year you would still owe them the amount of the overdraft.

 

Mossy

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