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Half a million borrowers to be repaid interest and charges
Almost 500,000 people are to be repaid interest and charges by 17 banks and building societies following action by the Office of Fair Trading (OFT).
The banks and building societies, which the OFT is refusing to name, were found to have not provided information in the format required by the Consumer Credit Act 1974.
As a result they will have to repay more than £149 million in interest and charges that were levied on store cards, credit cards, loans and hire purchase agreements.
What the Act demands
Under the Consumer Credit Act lenders are not entitled to recover interest or default charges for any period during which they failed to comply with certain statutory requirements.
Unfortunately for the 17 lenders involved, they were found to have failed to provide borrowers with some post-contractual information about their credit agreements. For example, many did not provide the required statutory wording in statements and arrears notices.
Why the OFT acted
A number of banks have been found to have problems meeting their requirements under the Act in recent years.
In 2012 Northern Rock had to shell out an average of £1,775 compensation to more than 150,000 borrowers due to letters it sent out which didn’t tell customers their original loan amount. Then last year Barclays had to refund 300,000 personal loan customers, while the Co-operative Bank had to repay mortgage customers £105 million, in part due to “a technical breach of the Consumer Credit Act”.
As a result in November last year the OFT wrote to 50 banks and building societies to establish whether they were fully meeting their obligations when it comes to post-contract information. That action has now led to today’s announcement of repayments to borrowers.
What happens now?
Borrowers who are due repayments will be contacted directly by their bank or building society. You don’t need to do anything yourself.
