UPDATE in August 2021 Barclaycard is sending out some letters saying “they have noticed a mistake was made with one or more statutory notices(s) in the past”. That’s very vague! But those too may well be the “NOSIA refunds” described in this article.
In June 2021, Santander sent some credit card customers a letter saying they would be paid a refund because Santander had failed to send them a Notice of Sums In Arrears (NOSIA) letter.
Some of these refunds are very large – one Debt Camel reader was told she would get more than £10,000 credited to her bank account within 10 working days.
Many of these refunds however were not paid on time and some have been changed. Santander says 600 people will be receiving a lower amount than they were originally told. Some people will be receiving more.
Santander realised some of the numbers were wrong
When a few people phoned some phoned up to check, they were told there was an error in the calculations and a new letter would be sent with the revised number.
At first Santander customer services could not say what was wrong – people were told the revised number could be larger or smaller, which was alarming. One customer said:
Santander said that the refunds will be more, less or nothing at all. They couldn’t tell me on the phone how much it will be and were very evasive about the error. I’m so angry that they can do this. The money would be a huge help.
By 9 July Santander had recalculated the numbers and people who phoned up were given the correct one. New letters have been sent out.
Most seem to have had small changes and many increased a bit – £100 up, £15 up. But one person in MSE reported a massive drop – they had originally been told they would get a refund of over £3,000 but the new number was only £585.
The timescale for paying these amounts has gone back. It seems they will now be paid in 10 days from the date of the new letter.
This has left people wondering, is this new number correct?
So let’s look at what a NOSIA refund is, and how much it should be.
Why are NOSIA refunds paid?
This is a simple overview. Any debt advisers wanting the full details should read SDAS’s Checking Post Contractual Information Compliance under the Consumer Credit Act 1974.
Lenders must send customers specific letters in various situations so that customers are informed about the status of their account. The letter we are interested in here is a Notice of Sums In Arrears (NOSIA) which was introduced in 2008:
- NOSIA applies to loans as well as credit cards and catalogue accounts;
- a creditor has to send you a NOSIA when you are in arrears by two months of payments;
- the letter is in a set format and has to be sent within a set timescale.
If you have not been sent a NOSIA when you should have been, the creditor cannot charge interest, add charges or enforce the debt, for example by taking you to court for a CCJ.
When the creditor later sends you a correct NOSIA, they can start to charge interest and the debt becomes enforceable. But the interest and charges that have were added during the “period of non-compliance” before the correct NOSIA was sent have to be removed from the account as they were unlawfully charged.
This is what Santander is doing. Because of a systems error, it didn’t send NOSIAs to some credit card holders who had missed some monthly payments. So it has to refund all the interest and charges since that point.
How do you calculate a NOSIA refund?
There isn’t an easy way to get a rough estimate of what you should receive.
The number may be small if Santander soon stopped adding interest to the account, for example if you asked for a payment arrangement or put the debt into a Debt Management Plan. It may be very large if you repaid the arrears and carried on using the account for a long while.
Interest and charges
The number marked A in your letter should be the sum of all the interest and charges added to your account since the first time Santander should have sent you a notice.
They have enclosed a list of all the NOSIAs they should have sent. The key date the refunds start from is the Due Date for Notice 1.
Unless you have kept all your credit card statements since that date, you can’t tell if the total Santander has given is correct.
You can’t add up the numbers given in the Notices Santander has given you. Those are the full payments due on a monthly statement – you are not getting a refund of all of those, just of the interest that is added to the accounts.
If you think you have paid a lot more interest than the number Santander say they are refunding, you can ask Santander to send you a copy of all your personal information, known as a SAR. You are going to get a LOT of paper sent to you to search through.
If the second letter from Santander offered a much smaller amount than the first letter, you may think this is worth looking into. Otherwise, unless you think Santander’s number is wrong, there probably isn’t much point in doing this.
8% simple interest
This is marked B in your letter. It too is hard to work out.
First you need to know all the individual items of interest being refunded in the total A and the date of each. For a credit card that is being used, these numbers may change a lot.
Simple interest is 8% added for each year, not compounded. So 8% simple interest on £100 for two and a half years is 100 * 0.08 * 2.5 = £20.
The number B may look low to you. But you didn’t pay all the interest you are being refunded on the earliest date – it was spread out over years. So the later interest being refunded will not have has as much 8% interest added as the earlier payments.
You could ask Santander to explain how they calculated it, but you may not get anything very helpful in reply.
There is no tax on the interest being refunded – this is your own money you should not have had to pay.
But the 8% simple interest added is treated by the taxman as “savings interest” so it is taxable. But everyone has a tax-free savings allowance, so you may be able to reclaim some or all of the deduction if you pay basic rate tax or don’t pay tax. Higher rate taxpayers may actually owe the taxman more.
The number marked C on your letter is the tax Santander has taken off and paid to HMRC. See PPI or affordability refund? Get back the tax deducted! which explains who can reclaim some of this deduction and how to complete the R40 form.
“Is it fair for Santander to reduce the refund it promised?”
I don’t think Santander has handled this well.
As soon as it realised there were errors, it should have immediately informed the customers that there would be a delay in paying them and that some of the numbers may change. It should not have waited until all the recalculations had been done.
People should be able to rely on what a bank tells them about when they will credit your account. If you can prove that you have gone overdrawn because the refund was paid late or was reduced, then you could ask Santander to refund you the extra costs you have incurred.
“Should I get a NOSIA refund from my bank?”
NOSIA errors are an unusual systems error by a bank or other lender. They are often picked up in a lender’s audit.
Other banks have had to pay some NOSIA refunds in recent years and they always come as a surprise to people.
It isn’t possible for you to guess if this mistake has occurred. It is uncommon – if you are in financial difficulty and ask for help from a debt adviser, it isn’t something the adviser will normally check for.
When you know you missed some payments, the only way to find out if you were not sent NOSIA letters is to ask your bank for a copy of the NOSIA letters you were sent, or for a full SAR (a copy of all your personal information) which would contain these letters.
Was your credit card, catalogue or overdraft limit increased too high?
What to do if a lender won’t freeze interest
Should you ask a debt collector to produce the CCA agreement for a card or loan?