Partially upheld: Mortgage administration / arrears handling complaint against Prestige Finance Limited

Decision detail

Summary

Mr and Mrs A complained about a second charge secured loan taken out in 2010, alleging they were charged 16.38% interest instead of the agreed 12.9%, had paid excessive charges, and were denied a Covid-19 payment deferral in 2020. The ombudsman found that the interest rate discrepancy resulted from confusion between different calculation methods (flat rate, APR, and annual interest rate), with the actual rate charged (16.63% annual/18% APR) being lower than the agreement maximum. However, the complaint was upheld in part because Prestige applied arrears charges when Mr and Mrs A had paid agreed amounts and failed to implement the requested payment deferral. The ombudsman required Prestige to reverse one charge from 13 June 2018 and confirmed the £50 compensation already paid for the deferral failure was reasonable.

The Ombudsman's reasoning

The ombudsman found that Mr and Mrs A were confused by different interest rate terminology (flat rate, APR, and annual interest rate) but were actually being charged the same rate throughout. The 16.63% annual interest rate (18% APR) charged by both lender M and Prestige was lower than the maximum 20.3% APR stated in the loan agreement and was properly applied. The interest rate reduction to 5.23% in 2021 was an appropriate forbearance measure. However, the ombudsman found that four specific arrears charges were applied unfairly when Mr and Mrs A had paid the amount agreed, and six additional charges should not have been applied during the period when a payment deferral should have been in place. After Prestige confirmed which charges had been refunded, only the charge from 13 June 2018 remained unreversed. The £50 compensation for the failure to grant the Covid-19 payment deferral was reasonable.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website