Rate changes on a loan

whatnext

Took out a car loan in Feb 2011 with one of the main banks.
Repayments of €x per month at a rate of 7.95% over 5 years. 60 repayments.
All stated clearly on the first page of the contract.
Now it does state that the rate is variable (in half size font on the bottom right had side of the first page) and I understand and accept that.
But looking back on my statements I see that the rate went up to 8.2% in April 2011, and then 8.45% in July 2011.

My repayments have not gone up so I assume its safe to say that the term of the loan is going to be extended to meet the extra interest costs?

But the real thing is I found the whole thing a little underhanded. They upped the rate twice in the first 5 months of the loan. No notification received, and the statements are retrospective, ie I got the first statement in Dec 2011 so even if I was paying attention this would have been the first I'd have known about the rate increases.

Surely they have to notify me of a rate change before doing it? (even though there is bugger all I could have done about it)

There is no reference to notification in the contract or no reference to what happens to extra costs associated with a rate increase either.

Its not a massive deal really financially probably €180 to €200 over the term of the loan, but I feel a little conned.

I'm going to chance my arm with a complaint on the notification side, I suspect I'll get nowhere.

Has any one had anything similar happen? Did you get anywhere by raising it with the bank, particularly with regard to notification of the changes?

dotsman

Typically, you don't get notified about loans. I'd read the credit agreement again and the terms & conditions as it should specify. Typically it will state that notifications are done via newspapers/website/media etc. Also, the loan is not usually extended, just that the final payment will be larger/smaller to collect the residual balance.

As it is variable, there is usually nothing stopping you from increasing the payments now to reflect the increased interest rate, thus reducing the overall cost of credit and ensuring that there is no large payment at the end.

It's not so much "underhanded", just convenient. They could notify ever customer about every rate change, but that would increase the cost of the loan to customers, so probably not much appetite there. Likewise, the banks would probably run into a lot more hassle with customers if they were constantly changing the direct debit amount (ie a person might end up missing a repayment because they only had €200 in their account (which would have previously been enough), but the repayment is now gone up to €205 etc...

Finally, with regards the notifications, they do notify customers via the statements (the reason for statements - to notify the customer about the changes to the account over the previous period). Even though your statements are from 2011, you only seem to be noticing now. Most customers are like that. Regardless of whether they were notifying the customer that the interest rate is soon to increase or has recently increased, most customers will just ignore and only study it and action it later, if ever (I'm convinced most people just throw statements in the bin - from all my years of renting, the amount of statements/notices from banks to previous tenants is phenomenal).