Q&As

What happens if a lender incorrectly charges interest on a credit agreement?

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Published on LexisPSL on 29/08/2014

The following Financial Services Q&A provides comprehensive and up to date legal information covering:

  • What happens if a lender incorrectly charges interest on a credit agreement?
  • How should interest be charged on a credit agreement?
  • What happens if interest is not charged in accordance with the terms of the credit agreement?
  • Are there any consequences?
  • What action should a lender take if it discovers it has incorrectly charged interest?

What happens if a lender incorrectly charges interest on a credit agreement?

BREXIT: 11pm (GMT) on 31 December 2020 (‘IP completion day’) marked the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. Following IP completion day, key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see: Brexit and financial services: materials on the post-Brexit UK/EU regulatory regime.

How should interest be charged on a credit agreement?

The term of the credit agreement will specify the interest rate payable (if any) on the credit provided under the terms of the agreement. As well as setting out the rate of interest, which must be charged on a per annum basis, the credit agreement will also set out how interest is calculated and added to the account. For example, for certain fixed-sum loans the amount of interest will be calculated at the beginning of the loan and will be added to the loan balance on Day 1. Other loans will calculate interest on a daily basis on the outstanding balance of the loan and add the interest to the loan account

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