What can you do if a creditor is still adding interest when they have been asked to stop?
This can happen if you ask for a payment arrangement. It also sometimes happens, but more rarely, in a Debt Management Plan (DMP).
Most creditors do freeze interest if you have supplied a reasonable Income & Expenditure Statement. If you are in a DMP, your DMP firm will have sent the creditor this.
The regulator says firms have to treat a customer fairly when they know you are in financial difficulty. Not freezing interest isn’t fair!
This article has a template you can use to complain.
Contents
Why should creditors freeze interest?
The regulator says lenders have to treat customers fairly
The Financial Conduct Authority (FCA) who regulates all lenders in the UK says they should treat a customer in financial difficulty fairly. That is a key principle for the FCA.
Here are some extracts from the FCA’s rules.
A firm must treat customers in default or in arrears difficulties with forbearance and due consideration.
Examples of treating a customer with forbearance would include …
considering suspending, reducing, waiving or cancelling any further interest or charges (for example, when a customer provides evidence of financial difficulties and is unable to meet repayments as they fall due or is only able to make token repayments, where in either case the level of debt would continue to rise if interest and charges continue to be applied).
Major banks and many credit card companies in Britain subscribe to The Standards of Lending Practice. The Standards say:
Firms should consider freezing or reducing interest and charges when a customer is in financial difficulty.
“Consider” may sound a bit vague. Perhaps a lender will just tell everyone “We thought about it and won’t freeze interest as it will lose us money” … they aren’t allowed to do that. If they do, they will very probably lose any cases that are taken to the Ombudsman!
The key thing to remember is, if you are in financial difficulty, lenders have to consider freezing interest so you are protected from escalating debt.
The regulator has emphasised the importance of this in the Cost of Living crisis.
Check if interest is being frozen in a DMP
If your DMP has only just started, don’t worry if interest is still added. It can take a while for your DMP firm’s letters to be read and acted upon. You may even get chasing letters saying you need to pay in the first couple of months – ignore these!
But after three months it’s worth checking if all your creditors have agreed to freeze interest.
Most creditors will have stopped. Many people will find all their creditors have frozen interest. But it’s best to be sure.
If they haven’t, your DMP firm will probably write to them again, but I suggest you also write to the lender.
Loans are more difficult
Freezing interest applies to new interest being added. It is most important for cards, catalogues and overdrafts.
For loans, the amount of interest is fixed at the start. A firm doesn’t have to reduce that amount. But they can’t carry on adding more interest – for example if your loan was for 5 years and 2 years in you entered a DMP which is expected to last for 6 years, they can’t carry on adding “new interest” because your loan now lasts longer.
If they are still adding interest … make a complaint!
A template to complain
If a creditor has been asked to freeze interest but hasn’t, and they have been sent an Income & Expenditure Statement by you (in a payment arrangement) or by your DMP firm, send them a version of the following complaint, deleting any bits which are not applicable for you.
COMPLAINT re account number 9999999
If you asked for a payment arrangement say:
I have asked you to freeze interest and not add any charges to my account. You know I am having financial difficulties. But you are still charging interest or adding charges to my account.
or if you are in a debt management plan say:
You have been asked by xxxxxx who are operating a Debt Management Plan for me to freeze interest and not add any charges to my account. The FCA says in CONC 1.3 that being in a debt management plan may be evidence of financial difficulty. But you are still charging interest or adding charges to my account.
The majority of my creditors have accepted my offer of payment, agreed to freeze interest, and are not adding charges.
Say either
The monthly payments that I can afford are not enough to cover the interest you are adding, so my total debt to you is increasing each month.
or
Your refusal to freeze interest is prolonging the time it will take me to clear my debts unreasonably.
Continuing to add interest is not fair. And it is breach of the Consumer Duty as you are making it more difficulty for me when you have been told that I am in difficulty.
I am asking you to reconsider your decision and to freeze interest and stop adding charges to my account.
I would like you to refund the interest and charges you have added to my account since [I set up the payment arrangement with you/I entered a debt management plan].
Thank you for your assistance,
Your name
Just change the template so it describes what happened to you. For example if the lender froze interest for a while but then started adding it again, say this. And if the lender told you they could not freeze interest until you were in arrears by several months, add that.
If you have mental health issues such as depression or anxiety, you could add a bit about this to the letter. Some people would prefer not to, but it could make a lot of difference as lenders usually have policies in place for different treatment of ‘vulnerable’ clients, see this article on Debt and Mental Health for details of what to write.
How to send the complaint
It’s best to send this complaint by email, which is instant, free and you have a copy of what you sent with a date stamp. Here is a list of complaint emails for the major banks, credit card lenders and catalogues.
Use a clear email title eg “Complaint that you have not frozen interest in my DMP”
If the creditor provides a Secure Message system, you can use that but be sure to take a copy of what you send and a note of the date.
When there is no secure message facility or you cannot log into it as your account has been closed, you may have to send the complaint by post – use recorded delivery.
Take a rejection to the Ombudsman
If you get a rejection or no answer within 8 weeks, take your complaint to the Financial Ombudsman.
Do take cases to the Ombudsman if they have been rejected. Even if the lender has replied saying they are legally allowed to do this or sent you long complicated explanations, you may still win your complaint at the Ombudsman if they have behaved unfairly. Adding interest and charges when you are in trouble is not fair.
The Ombudsman is a customer-friendly service. You don’t need to be able to quote laws the lender has broken, just explain your situation and why you feel the lender is being unfair by continuing to add interest.
Success stories
Sending these complaints isn’t guaranteed to work but it’s well worth a try! Getting that interest frozen could make a HUGE difference to how quickly you can clear the debt.
Some Ombudsman decisions
Here are a couple of cases where the Ombudsman told the lender to refund the interest it had been adding:
- a decision where the Ombudsman upheld a complaint against Argos;
- a decision where the ombudsman upheld a complaint against Simply Be
Some banks have paid refunds if they didn’t freeze interest
Some creditors are admitting that decisions they made a few years ago weren’t fair.
In 2018 Barclays started a program of refunds to some customers where it now feels it didn’t treat them well when they told Barclays or Barclaycard they couldn’t make normal payments. This includes some people where it carried on adding interest and/or charges.
One reader read the article about Barclays and contacted his bank, Lloyds to ask for a refund:
I had written to them in 2013 during our DMP asking if they would freeze interest. They reduced it but didn’t freeze it for another 12 months. I asked them yesterday to consider refunding the interest for this 12 month period.
I had a call this afternoon to say that at the time they had fulfilled their obligation but on reflection they should have reduced to zero %. They offered me a refund of all interest plus a goodwill gesture of £75 and a very sincere apology which was accepted. I had the money on my account (£706.00) within an hour of that call!
This is very good news.
More recently, interest being added is often a mistake!
In late 2022, someone reported that a credit card was still adding interest. I told them to query this – the lender’s reply just said they had only stopped interest for a few months and didn’t mention the DMP.
So I suggested making a formal complaint to the lender.
Then they got a reply saying there had been an error, interest should not have been added. The lender removed the interest added since the start of the DMP from the balance and offer £100 in compensation.
Barclaycard credit limits too high
Can you get a refund for these loans?
Could a Debt Relief Order help you?
james w says
Hello, v. good site it’s got to be said. No doubt it varies a lot from individual to individual, since people’s circumstances are different, but just how often (or not), overall, do lenders agree to freeze interest when someone has gone on to a DMP, supplied the income and expenditure sheet, etc, ie done everything correctly from their end? 70% of the time? 90%? 25%?
I read somewhere on a forum, a reliable-seeming person saying that in fact, rarely is interest frozen when on a DMP, and rarely does someone not get a lot of ongoing hassle from creditors (phonecalls, letters…etc). Attempting to go on a DMP will affect someone’s credit records so…it is important to try to establish the actual likelihood of interest being frozen, if you are thinking that a DMP might potentially be a route to go down…
Sara (Debt Camel) says
It can vary a lot – between creditors and between individual cases. But 70%+, and many people will find it is 100%.
The “reliable sounding person” I am afraid didn’t know what they were talking about.
If you can’t make the minimum payments on your debts (and if you can you shouldn’t be looking at a DMP!) then there aren’t any options that will not affect your credit record. You may find this https://debtcamel.co.uk/worried-dmp/ helpful if you are worrying about starting a DMP.
james says
Thanks. If you can more or less repay the minimum payments on your debts, but the minimum payments are 75% interest (and the debt level is sizeable), then as a rule of thumb, should you be looking at a DMP (or other debt solution route) or, endeavouring to keep those minimum payments going while looking to improve your pay/outgoings scenario so as to pay more to the debts each month? I ask as you say if you can make the min payments you shouldn’t be looking at a DMP.
My position is in flux so I am weighing up different possibilities (and I see that without interest/charges that I am just about paying, I would potentially be able to pay off quite a lot per month to the debts themselves…at the cost of having a damaged credit record…)
Sara (Debt Camel) says
I don’t really believe in “rule of thumb” approaches here. Say you are a couple with one child aged two, spending £300 a month on groceries (food and anything else you can buy in a supermarket) – unlikely to be any savings there – look at a DMP. If you are single and spending £300 on groceries and take aways then you can probably cut back a lot! Same debts, very different situation.
One option I really do suggest is to talk to StepChange about a DMP https://www.stepchange.org/. They will go through your situation and suggest if a DMP is appropriate, what you would have to pay to it each month and what your other options might be. If they say they don’t think a DMP is right because you can afford to pay your debts, then this is the sort of situation where you may well find that creditors refuse to freeze interest. The advanatage of talking to StepChange is that they are non-commercial – if you say you don’t want to set up the DMP or you want to think about it for a few months they will be happy – you won’t get a “hard sell” and you won’t get bombarded with calls, texts or have your details sold on.
If you think you can increase your pay and/or decrease your outgoings then that is the obvious thing to try first. Unless you already budget in detail, it’s always good to keep a spending diary for a month or two https://debtcamel.co.uk/resolution-spending-diary/ as it can be an eye-opener.
If you think there is a serious chance of clearing your debts and saving for a house deposit in the next few years then protecting your credit rating is essential. But you won’t get a mortgage if you have a lot of debt (see https://debtcamel.co.uk/mortgage-with-debts/) so if the only way to pay off your debts is debt management or insolvency then you have to face up to that and accept they are going to harm your credit rating so you won’t be able to buy soon afterwards. Struggling on not really making an impact on the debts may protect your credit rating but it doesn’t get you any closer to buying a house.
james says
Thank you for this.
As I think round the possibilities available, it occurs to me that what would be ideal is to have a ‘stay of punishment’ of the kind a DMP provides – perhaps lasting up to a year, or two years – but that after that, it would be good if I could continue with the current arrangement I am in (an ordinary one…where I pay interest and charges). Because i’ll have improved my work and pay situation in the short term, or over the next year or two. The reason I’m thinking this might be a good route to go down is that if you could do this, maybe it would have less impact on the credit file than if you just opted to go on to a DMP full stop, to deal with your debts, or just opted for an IVA from the outset (both of which things wreck your credit file as they look like defaults). If you could do this, perhaps your credit file might look better because you were paying the sums required to the card lenders (after the period of not doing so on the DMP).
In theory, if you did things like this then maybe you wouldn’t be subject to the very long period (6 years ish) of presumably not being able to get credit that you would get with a DMP or IVA. You might be able to get an offer of a new 0% balance transfer card after a bit? (to help with your card debts)
Of course, I’m just speculating here but wondered if the above was a possibility. If so it would be a potential ‘third way’, rather than doing a DMP or IVA. However, if by doing the above, it didn’t mean your credit file was in a better state than if you simply did a DMP, then it wouldn’t be worth going down this route.
Does such a third way exist? (or another where your credit file is not destroyed by having gone on to a DMP for a while…) Cd you advise? Ta in advance!
James
Sara (Debt Camel) says
What you need is a temporary DMP! It sounds as though you can make reasonable, not token payments. So you will get late payment markers then probably AP markers, then after a year you can start make the normal repayments.
Otherwise you are fishing for a solution that doesn’t exist. If you can’t make the normal repayments, there is no debt solution that will not damage your credit file to some extent.
Kate says
Hi
I am in a payment plan with studio and although they have frozen interest, whilst in the plan the have added charges which make the debt go up. I owe more now than at the start. It is really getting to me. I can’t access my account online.
Do I just use the template letter and refer to charges rather than the interest? Do I need to calculate how much by asking for back statements?
Any pointers would be appreciated.
Sara (Debt Camel) says
No you don’t need to do the calculation – just ask for the added charges to be deducted.
I don’t know if Studio also gave you a small credit limit at the start and kept increasing it until it was unaffordable? If they did, you could also complain about this, see https://debtcamel.co.uk/refunds-catalogue-credit-card/. If you do this make it very clear that you have two seperate complaints.
Kate says
Hi Sarah,
Thanks for your advice so far.
I have had my letter back from Studio who gave me a ‘goodwill’ gesture of £12 but letter says words to the effect of it was my responsibility to pay on time as they have already frozen interest.
Do i now send a complaint letter but refer just to charges similar to the template above?
Sara (Debt Camel) says
Yes, exactly that.
Kate says
Studio are still refusing saying they have a right to put on these default amounts of £12 even though the plan is only £5. What do I do now ? Ask for a list of the charges or go to FOS with no real figure?
Sara (Debt Camel) says
I would send it straight to the Financial Ombudsman.
Dan says
Hi great site just a bit of info on my journey to be debt free.
Been in a dmp with step change since August 2013 how ever 4 credit card company’s and a personal loan (all high street names) were adding on interest for over 12 months at the start i recently put in a complaint and received intrest refunds from 3 totalling £2400 and waiting for responces from 2 others. The 3 that have paid out did with in a week of me complaing unbelievable!
This is the shameful bit due to major financial problems I ended up in the pay day loan cycle whilst in my dmp, went through all my bank statements and I took out 67 individual loans from 10 different company’s from 2014 to 2017. I did the right thing in the end and added the last loan from each individual company to my dmp step change were amazing. I have now thanks to this site submitted affordability complaints to all 10 company’s. One (who I only ever had one loan with but was still outstanding on my dmp) emailed me back after 1 week saying they have refund £350 of interest that left £250 outstanding and have also decided to write off the reamaing balance. Great news just waiting for the final responses from the other 9 !
Emma says
Hi just wondered if I pay off my debt with very in full will I still be able to claim back the interest they have continued to add even though I have been on a stepchange DMp for four years they have added so much interest my debt has not even reduced at all?
Emma
Sara (Debt Camel) says
It’s worth a try, but get your complaint in asap. The sooner it is in the better.
Dan says
As per mine above your comment all companies that were adding on interest when i was in a DMP with stepchange from August 2013 have refunded all interest and charges back to me, The biggest was my Lloyd’s credit card which was over £1100 refund. I didn’t even have to take any of them to the FOS.
For these complaints i used the template letters on this great site and just adjusted them into “interest being added during a DMP”.
The payday loans affordability complaints are proving a little harder and I have had to pass half of them onto the FOS, How ever 24/7 money box and satsuma wrote of the whole debt of over £1000 before even having to go that far.
Emma wouldn’t it be better to put the interest being added when in a DMP complaint first to see how much you could get back, I had refunds from 3 within a couple of weeks. You may even just get the balance wiped out and no need to use any of your own money. Dont put yourself in financial hardship.
good luck :)
emma says
Thanks Sara and Dan,
I’ve already sent the complaint with regards to them adding interest while in step change DMP to one of the debts involved. Three are with Shop direct so I will resend the same email with the other accounts.
Emma
The Hitman says
Hi,
I had a loan with HSBC in 2007, that was transferred to Robinson Way/IND in Jan 2012, also getting a CCJ (which is now paid) IND applied a large amount of interest. The question is could I apply to claim this interest back?
Thank you.
Sara (Debt Camel) says
I think the first thing is to find out the facts – how much interest was added and when. I suggest you send a SAR (Subject Access request) to HSBC. If IND bought the debt, then also send a SAR to them. You want to request ALL personal information that they have about you as you want to know how much interest was added and when, but you also want a copy of the original loan documentation and it may be interesting to see if you ever told HSBC or IND that you were in financial difficulty and asked them to freeze interest.
The Hitman says
Excellent, thank you Sara :-)
Lisa says
Hi can I ask if anyone has had problems with Argos with unable to pay on the bnpl I owe them money but don’t know if they are helpful or will sell the debt
Sara (Debt Camel) says
Argos are not known for being helpful… but call them and explain why you can’t pay, ask for an affordable repayment plan and for interest to be frozen. Don’t be pushed into paying more than you can afford. If you have other debts as well, it may be better to talk to National Debtline about your full situation: https://www.nationaldebtline.org/
To be honest, unless your money problems are really only going to last a few months, the best thing will be if Argos do sell your debt. Debt collectors are usually much easier to deal with and freeze interest than catalogue companies!
John says
HI Sara,
I am making my minimum payments for all 13 of my credit cards but the interest is stopping me from making any real dent into the balance. And when I have paid I have very little left to live on after my priority expenses – although it is managable. I am hoping to ask my 3 biggest credit card lenders to freeze the interest on the cards. My question is is this the same as a DMP and will it show on my credit file? I am due to remortgage in 4 years times and I am worried about the impact. I could still afford to make the minimum payment amount on these 3 cards if I needed to and that wouldn’t be viewed as a DMP because it would at least allow me to pay down the balance.
Best Wishes
John
Sara (Debt Camel) says
It’s pretty unlikely your creditors will agree to freeze interest unless you are in financial difficulty, which means not being able to pay the minimums. If they did, it would be recorded as a payment arrangement and would have the same effect on your credit record as a DMP. It wouldn’t stop you remortgaging with the same lender, but would make it hard to switch lenders and get a reasonable rate.
Some ideas that are more likely to work:
If your credit record is very good, have you looked at a balance transfer to 0% to help speed up your debt repayments? https://debtcamel.co.uk/zero-per-cent-balance-transfers/. Or could you get an unsecured loan at a low rate of interest – 5% or so – to clear some of the cards? Don’t get a secured loan or you will make that remortgage harder!
Have you looked at reclaiming any PPI? And make sure you aren’t paying for any odd insurances or protections on any of the cards, that just prolongs your time in debt.
Have look at a general “money detox” https://debtcamel.co.uk/money-detox-seven-easy-steps/.
But if you are thinking none of these will help, then I suggest you talk to StepChange about a DMP https://www.stepchange.org/how-we-help/debt-management-plan.aspx. They will look at your situation and they will not recommend a DMP if they think you are managing fine. But if they think you need one, then usually it’s better to start one as soon as possible as then it ends sooner.
John says
Thanks for such a quick response. Sadly the debt totals £60,000 across the cards so my credit score isn’t good enough for an unsecured loan or new balance transfer card. I have already claimed back the PPI that I was due as well.
With the new FCA rules about persistent debt requiring companies to consider waiving interest for people who can’t get out does this still have the impact of a DMP?
So if I got the interest stopped but still made the minimum payment they were asking for it makes no difference? It is still as bad as a DMP?
If I opted for a secured loan but had it and the debt paid off by the time I re-mortgage would that be a good option?
Sara (Debt Camel) says
“So if I got the interest stopped but still made the minimum payment they were asking for it makes no difference? It is still as bad as a DMP?” The FCA hasn’t said what should happen in this situation. So my guess is most lenders will apply the current rules http://www.scoronline.co.uk/sites/default/files/high_level_prinicples_document_final.pdf. Asking for interest to be frozen is an arrangement to pay less than the contractual norm.
Sorry but if you are trying to put off a DMP in the hopes that the new persistent credit card regulations will come to your rescue, that is probably not a good idea.
Very large secured loans tend to be for longer than the 4 years until your current fix ends. And not as cheap as you might hope if your credit score is not good.
Do yourself a big favour and talk to StepChange. If they say you don’t qualify for a DMP because you can afford the repayments, well at least you know where you stand.
ETBP says
I’m sorry if this is the wrong forum, and I fully appreciate that what you do here is free and I applaud you all for that.
Me and my partner were under a DMP between 2013 – 2017. And have since been living carefully within our means.
I recently received a refund from Barclaycard which I was not expecting. But after reading many threads, wonder if I should adopt the same approach with all my creditors during that time.
Is there a template letter for my situation, where I can write to each individual creditor asking to refund any interest and charges they applied during my DMP.
My financial difficulty extended outside of my time with Stepchange, but I still made ALL payments on time. So cannot demonstrate this with proof. However; this was at the detriment to my spare cash for food and lifestyle, and my mental health. I was not made aware of any help that could be offered by any of my creditors and seemed out Stepchange myself. Is there anything I can pursue outside of this time. Perhaps irresponsible lending?
Furthermore, I enquired with Barclaycard whether they would consider refunding interest and charges applied to my account outside of the dates in the letter, but they refused, and stated that they are not considering this with any customers. I raised as complaint but was told the same and the complaint was not upheld. Is this true?
I appreciate any guidance you can give on any of the points given above.
Sara (Debt Camel) says
You could try a letter along the following lines:
“re account number 9999999
Dear Sir
I was in a DMP with StepChange between 2013 and 2017. StepChange asked you to freeze interest and charges, but you did not do this. These extra charges you added while I was in a DMP prolonged the time I was in debt unreasonably. Most of my creditors agreed to freeze interest and charges.
I would like to ask you to refund me the extra interest and charges you added.
Yours faithfully, Sign & date”
But do you know which creditors didn’t freeze interest? Most creditors do. It would be unfair to send this letter to all your creditors including those who did freeze interest.
What were the dates on the Barclaycard letter?
Ellis Banton-Place says
The dates on the standard letter I cannot quite remember, but I think it was from October 2013.
I have now raised a query with all my creditors during this time. Asking for details of all interest and charges issued whilst under a DMP.
I have also requested that they double check the default dates and requested that they remove them if they are now deemed unfair.
I will fully accept that I have no refund due to me if they followed Stepchange advice, and I also recognise that at the time they were well within their rights to add interest, as per the terms of our agreement.
I understand am not entitled to anything from my endeavours, It seems that the behaviour of bank’s today are a lot more flexible and ethical, and I am only asking for them to reflect that with our history.
Thanks for getting back. I’ll keep you posted.
Eliot says
Can you advise me please, I am currently in a DMP with Payplan, have been for 4 months, have around another 12 to go, Barclaycard have placed a default on my credit file, I have made all payments. I am not in any arrears that I know off, I have been making payments which were above the minimum what I was paying previously,
I rang Barclaycard and was informed by the colleague that automatically if I entered into a DMP with them I would receive a default on my file, which will not clear for six years, as it is their policy, I queried this as I do not believe I had any arrears, and therefore a default is unfair and untrue, other lenders have placed arrangement to pay on my file, but barclaycard have put a default which seems very unjust, can you advise me how I can get around this, they also said they could not see my payments, even though I had made them all.
Sara (Debt Camel) says
so your DMP is only lasting 16 months? Have lenders frozen interest?
Eliot says
I had debts over £5,000 and agreed to pay £540 a month to resolve the money’s owed, I’ve made 4 payments so far, all lenders except Capital one have accepted the terms of my plan, including Barclaycard, so I believe interest has been frozen.
Sara (Debt Camel) says
It is unusual for the lenders to freeze interest for so short a DMP.
You are not in arrears, but by asking for interest to be frozen, you aren’t really making the agreed payments in the original contract, as that would have inclded paying interest. I don’t know what the Ombudsman would think if you took a complaint to them.
Roberto says
Hello my marbles complain is now with the FOS (Newday) which I first got out in March 17 with a £300 limit.So I received my first ever default with a payday lender called Smart pig in January 29th 2018 but Marbles still increased my credit limit from £1,000 to £1,500 in March 2018. as I was maintaining the minimum payments .In August 2018 even though my account with smart pig was still in default Marbles still decided to increase my credit limit to £2,250 . Since Marbles increased my balance from £300 to £1000 I did ask them to freeze the interest on my account for a month or two etc but they said they couldn’t .I was paying the minimum from March 17 to about June 19 most months.I borrowed more most months as soon as that minimum payment cleared so the balance hardly dropped ever.From March 17 to June 19 my level of debt roughly doubled maybe even tripled if I include the Amigo loan that I was a guarantor for.I missed quite a few payments over the two years resulting in more fees being occurred. Throughout the time which I used this card it was more or less maxed out.I have now paid of all the card.What is the chance of me receiving anything..
Katie says
Hi, i am in financial difficulty and have contacted all lenders and agreed a payment arrangement. This includes a payday loan through satsuma. Ive noticed that whilst they have agreed the repayment, the interest was added to the loan up front. Meaning i will still pay pack double what i borrowed. So they arent really freezing the interest. Is this common practice?
Sara (Debt Camel) says
yes that’s normal with a loan. but they won’t add on any more interest even if takes longer than the loan term to repay the debt.
BUT have you looked at making an affordability complaint to satsuma ? See https://debtcamel.co.uk/refunds-large-high-cost-loans/ for Satsuma. If you win that, all the interest would be removed.
Did you have any other high cost credit?
Mike says
Hi Sara, I did post on another page but unless it was missed I wondered if you could help please?
Following some advice last year I went into a DMP which is a huge relief and has helped me out so much, so far.
One of my creditors in the DMP – MR Lender, who agreed with the payments through the DMP, I have a slight issue with. Since I’ve been in the DMP they just keep adding interest and more interest so I’m ending up paying a lot more than what I originally owed. I’ve spoken with Stepchange about this and they have asked me to query it with the lender. I just wanted your thoughts on this? Any advice? I don’t know how my debt will get reduced with them if they have added more interest taking the original outstanding balance up further?
Can you shed any light on this please?
Any help would be greatly appreciated.
All the best
Mike
Sara (Debt Camel) says
Can you give some numbers about this Mr Lender debt? How much did you borrow? Had you made any payments before the DMP, if so, how large? What was the balance owed when your DMP started? what is it now?
Also did you have other loans with them that have been paid off?
And do you have other high cost credit debt in your DMP?
Mike says
Hi Sara
It was originally just one £250 loan but due to financial difficulty with others also had no choice but to go DMP with stepchange. They were aware of the circumstances but they added fees assuming late payment or because I couldn’t make payment (whilst in the DMP) they had raised it to £449.30 – it has now been reduced to £394.93 but seems like I’ve been penalised for this? So all this interest or default fees have been added whilst in the DMP which is now taking me much longer to repay the initial owed amount. Yes I have other high cost credit in my DMP.
Can you advise?
Thanks Mike
David L says
Any thoughts on how to deal with companies such as My Lender, Satsuma Loans and Bamboo Loans in a DMP, who add interest at the start of the loan. My Lender and Satsuma have both said interest has been frozen but that’s because they’ve already added it at start of the loan and they would be then breaching the repayment cap of more than 100% of the original loan value in fees and interest.
Sara (Debt Camel) says
this is what normally happens with loans. they don’t add on any more interest because you are repying over a longer period.
But you said you were thinking about affordability complaints once your DMP is set up? That is the obvious way forward.
Sean says
Hello,
Wonder if you can help with an email for very? They have said they can’t freeze bnpl payments which at 39.99% keeps going up on my dmp which is quite high
Thanks
Sara (Debt Camel) says
So you have a DMP, who is the DMP firm? And this Very debt is included but they won’t freeze interest? HAve you asked them to? When did the DMP start?
Sean says
It’s with stepchange and yes very are included and they have said that bnpl are not included. I made my first payment start if this month
Sara (Debt Camel) says
very are included and they have said that bnpl are not included
Who said this Very or StepChange? Do you have another balance with Very that is included? When does the BNPL end?
Sean says
Apologies, my overall balance with very is the same as with stepchange however very have two balances for me, bnpl and just the normal one. Very say that when the bnpl ends in the August that balance starts accruing interest as they don’t freeze it apparently
Sara (Debt Camel) says
ah I see the problem.
I suggest you send Very a complaint. Try sending this to suzanne.edmondson@shopdirect.com – put COMPLAINT ABOUT NOT FREEZING INTEREST IN DMP as the subject.
“I have had to set up a debt management plan with StepChange for my debts, including my Very account (give a/c number).
I have been told the interest will be frozen apart from the on the Buy Now Pay Later, where interest will start to be added from August when it ends.
I am complaining that this is treating me unfairly.
You know I am in financial difficulty. StepChange have supplied you with details of my income and expenditure.
If you add interest in August to this debt it will prolong the time it takes me to get out of debt.
I am asking you to reconsider your decision and to freeze interest and stop adding charges to my account or I will be sending my complaint to the Finacial Ombudsman
Yours sincerely, Full name and address”
Justine says
Hi
I have a secured loan with Together finance. I am in arrears and because of the interest nothing is coming off the original amount and the balance is increasing. Is there anything I can do about the interest?
Justine
Sara (Debt Camel) says
Arrears on a secured loan are serious – can I suggest you talk to National Debtline on 0808 808 4000 about these, the rest of your finances and your options for resolving this?
Justine says
I have already spoken to National Debtline and I have also taken the company to the financial Ombudsman.
Sara (Debt Camel) says
what was National Debtline’s advice?
Justine says
They said that as I am paying the loan and some of the arrears Iam doing the right thing. They didnt advise me with regard to interest being freezed or any other options.
Sara (Debt Camel) says
It would be very unusual to get interest frozen on a secured loan. Do you have other debts as well? How much equity do you have in your house?
Justine Godfrey says
I am in an IVA. There is approx 10,000 equity.
Sara (Debt Camel) says
how long until the IVA finishes? because you can then start overpaying the secured loan?
Dan says
Hi Sara I Fell behind and stopped paying my Buy now pay later credit with creation roughly 2.5years ago, along with a lot of other debts. The majority of them went into default 3-6 months later and interest was stopped and went to debt collectors etc. However creation have been applying monthly charges and interest every month for the last 2 year and on my credit report it is still showing the account as active. And last month they sold the debt to Lowell and they have added a default from this month.
I have tried Writing and emailing creation about this but had no reply that was 6 months ago. Do you have any advice?
Sara (Debt Camel) says
Did you make it clear when you were writing to them that this was a complaint?
Dan says
This is part of the letter i sent them along with a settlement offer. I never made it clear it was a complaint no. They just don’t reply.
I first missed payments on this debt in June 2018 and according to ICO rules, DEFAULTS should be added within 3-6 months of the first missed payment.
I received a default notice from yourselves on 16th August 2018 (letter attached). Stating the default will be registered with the CRA’s no less than 28 days from the date of this letter (16th August). Also mentioned was ‘failure to comply with this notice will result in account closure and termination of my contract. However, my account is still active on all CRA’s and I have been accumulating charges month on month to this day.
I would like you to close and terminate my account and add a default to the credit reference agencies from September 2018 in accordance with ICO rules and your own default notice letter.
Sara (Debt Camel) says
I suggest you new send them a letter headed COMPLAINT saying you have not had a response to your letter dated dd/mm/yy and if you do not get a reply within 8 weeks agreeing to add the default you will be sending the complaint to the Financial Ombudsman.
You don’t just want them to close and add a default, you want the interest removed that they have added since that point.
Dan says
Thank you for your time I will do that as you say. However the debt has now been sold to Lowell for the full amount including all the interest so where do you think I would stand with that? Roughly £1800 when stopped making payment now my outstanding balance is £3000 with Lowell
Sara (Debt Camel) says
It will be Creation’s job to get the balance with Lowell adjusted if it is decided they should not have added the interest.
Sarah H says
Hi Sara,
Not sure if I am on the right thread, I have a credit card off Natwest from 2001, which had a balance of £500, I fell behind on payments told them I had moved and didn’t here from them for a while they got back in touch a few years ago and now it says we owe £2500. We have made small payments off here and there but our financial situation is not improving at the moment. Can I ask them to take off all charges and interest. Also I had a payday loan off minicredit for £150 and they now want £1660 paid back again can I fight this interest.
Sara (Debt Camel) says
Apart from these debts and the Amigo loan you have complained about, do you have other debts as well?
Sarah Heydon says
I do have about another 6 they are with Lowell and we are paying them between £5 and £10 a month
Sara (Debt Camel) says
so how much do they add up to? and are some of those debts really old?
The minicredit – when did you last make a payment to that?
And when did you stop paying NatWest, and when did they get in contact again?
Sarah H says
They add upto about £3000 and yes they are all old debts.
Mini credit I stopped paying in 2014 and to be honest it was one I forgot about until I received this letter.
NatWest we got in contact with about six years ago as we knew we had the debt but could not find it, NatWest told us they didn’t know who it had been sold on to so we waited to hear off the collection company who bought it. They then contacted us in Feb 2016 to say we new owed £2244.21, we made £150 in payments since.
Sara (Debt Camel) says
So you could send NatWest a complaint saying they should not have carried on adding interest for so long when you had stopped paying. Ask them to remove the interest and get the debt purchaser to correct the balance.
An alternative and quite different approach would be to ask the debt collector to produce the CCA agreement for the debt. You also do this with the Lowell debts if they were loans or credit cards (not overdrafts, mobiles bills, utilities etc). See https://debtcamel.co.uk/ask-cca-agreement-for-debt/. Sometimes this will work well for old debts, sometimes it doesn’t.
Minicredit you have a problem with as the lender went bust several years ago. You can try a complaint to the debt collector but it may not get anywhere.
Sarah H says
Thank you so much for your advice regarding NatWest and Lowell will write to them today.
As for mini credit I will speak to the creditor and see if anything can be done.
Thank you
Sara (Debt Camel) says
To be clear, if you are asking for the CCA agreement you should talk to the debt collector that bought the NatWest debt, not NatWest. But if you want to ask natWest to remove the interest, you talk to them not the debt collector.
Nicola says
Hi,
I’m looking for some advice please, we had a loan with Ratesetter for £15k, due to a number of events shortly after taking the loan we entered into a DMP, we were told that they’d agreed to the interest being frozen. Fast forward 5 yrs and we’ve paid off £11k but the debt has now been sold on and the starting balance says £19k, so we owe £8k, but this would mean that we will now pay back the full amount of interest, can I appeal this? Thanks
john says
Hi, I have several credit cards and overdrafts. I have really tried to keep on top of it, cut down huge, made all direct debits come out on the day after i’m paid so nothing can be missed – however, I have an overdraft with Starling and interest had taken me over my overdraft amount but 2 things.. they wouldn’t let me set up a direct debit at the start of me opening an account and 2, unlike all of my other banks I have a debt with , they don’t seem to go out of their way to make me aware of the monies owed or the consequences, they say they had left me 3 voicemails and 3 emails over a 6 month period, but these were missed by me. I now have a default against me and only noticed when I checked my credit rating account – i paid the amount due to get me back inline but the complaints department said they feel they done enough to notify me.. I disagree. Do I have a good enough case to further my complaint to the FOC and get this default removed?
Thanks,
John
Sara (Debt Camel) says
they wouldn’t let me set up a direct debit at the start of me opening an account
What 3mail did you want to set up?
Were you sent the emails and missed them, or is there no trace of them?
john says
they were sent and i missed them.
Andrew says
Hi, I am on a Debt management plan my interest is frozen but I get letters from my personal loan provider on plan saying how much interest I havent paid , After my dmp will I be billed for the interest ?
Sara (Debt Camel) says
This sounds like a standard notice of sums in arrears letter – it is normal to still get those in a DMP. See https://www.citizensadvice.org.uk/debt-and-money/debt-solutions/debt-management-plans/while-a-debt-management-plan-is-in-place/creditors-still-contacting-you-debt-management-plans/.
Talk to your DMP firm if you are concerned.
Eloise says
I took out a loan with Hitachi in Feb 2017. The loan was for a car and was front loaded with the interest. The value of the loan was 7995.00 with interest front loaded (£3159.00) making the total amount repayable at £11154.00
My payments were made fine until Jan 2019, I was charged £22 for a rejected DD, payments at a lower amount were made through a DMP with payplan, I was charged £25 per letter for 4 letters in 05/ 06 of 22
In 03/22, I started to receive ‘Balanced payment interest adjustment’ each of these ‘debits’ on the loan are for different amounts some debits totalled £185 – which was the original monthly repayment. others were less. The total ‘debits’ that have been added to the account is £1929.46 debits are added to the account monthly
can i be charged more interest when the interest was already front loaded onto the account? I made an unaffordability claim in 2019, which was refused. can they continue to bill / debit me for interest every month? – when it has already been front loaded. – The loan will never be paid off as the debits are often larger than the repayments that I am making through my DMP
Is £100 for 4 letters a reasonable amount to ask for, are they allowed to charge me £22 for a returned DD in 2019?
Sara (Debt Camel) says
I was charged £25 per letter for 4 letters in 05/ 06 of 22
these letters were when you were in a DMP?
When did the DMP start?
You said previously that you missed a payment to your DMP – did the Hitachi letters refer to this?
Can you say how large the debts in your DMP are? and what your current payments are? Are you now paying rent?
Eloise says
Thanks for the reply,
The DMP started in Jan 2019
no idea what the letters referred to, I am guessing because I missed a payment. – They were sent whilst I was in my DMP
My DMP started at £20,000, I now owe about £5000,(lots of credit) yes I pay rent. My current DMP repayments should be around £170 pm however I try to make payments of around £200pm.
I would like to know if they are able to charge the interest (debits) in addition to the original loan agreement which was front loaded with interest. (so 2 lots of interest really) – the letter charges are just secondary to my interest query.
thanks v. much
Sara (Debt Camel) says
I would like to know if they are able to charge the interest (debits) in addition to the original loan agreement which was front loaded with interest. (so 2 lots of interest really)
No they shouldn’t. You can complain if this is happened.
eloise says
great, thank you
Stevie says
Hello Sara, thank you for all that you do on this website. So many great resources.
I am currently contending with an issue: I can no longer meet my payments and one of my cards now has interest exceeding £350 per month. I just can’t keep up. I’m disabled with no income at the moment except state benefits. I am going to stop paying and default on the debts and then seek to set up a DMP or some sort of payment plan. However, one concern I have is what happens between now and that plan. Will they just continue adding thousands of pounds of interest over those months?
I will be eligible for a DRO in June – my debt is about £45,000. However, I would prefer to go for a DMP but I want to keep my options open (just in case I cannot cope at all with even a payment plan). I’m concerned that the interest added in the months that I wait for defaults will push me up to/over £50,000. Is that realistic or am I overestimating the problem? I have two loans, several credit cards and an overdraft.
Should I contact the creditors? Is there any scenario where they’d agree to stop adding interest (without entering a Breathing Space or anything else that will delay the inevitable defaults)? Thank you!
Sara (Debt Camel) says
I am assuming you are renting not buying.
If you will be eligible for a DRO than that sounds like you best option as no way can you clear 45k of debt if you habe That little spare income.
But what you need to do now is get interest stopped. Contact StepChange and say you want a DMP now. And possibly an DRO in June if you are eligible. And stop paying all the debts going onto the DMP immediately – tell them StepChange is setting up a DMP. This encourages an early default to be added.
Rob says
Hi Sara
I hope you can shed some light. I had a loan with AA for 10k over 48 months that had all of the interest added at the start. I went into a DMP early last year and was making all payments. From January, I got a payrise and was able to pay above my contractual amount for 5 months through my DMP. I just got a bonus and am in the process of settling all my debts. I contacted AA and they said said that they defaulted my loan on the 4th of June and now all interest is due even though I am able to pay the full amount after 38 months and not the full term. They are the only creditor on my DMP that will get back every penny of interest even though I am paying off early. Does this sound right/fair
Sara (Debt Camel) says
I think that is worth a complaint that it is not treating a customer who had financial difficulties fairly to penalise them by not allowing a reduction for early settlement.
Was the loan actually from the Bank of Ireland?