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You might not need to pay Homebuy Loans and you may be even receive a refund

Are you being contacted about a previous loan from Homebuy Loans? Do you feel that the loan was unaffordable at the time you received it? Are Homebuy Loans threatening to take you to court?  If you are facing issues with Homebuy Loans, then this could be the right article for you. You might be able to cancel your loan and you could even get a refund!

It’s not your fault. Complaints to the Financial Ombudsman have risen this year from 830 to 2,006, so it’s safe to say that you’re not alone.

Deal with your debt today and feel better tomorrow.

Homebuy Loans Debt

Who are Homebuy Loans?

Homebuy is a product that is offered by the Homes and Communities Agency, aiming to make homes more affordable to eligible buyers in the UK. When customers secure a first Mortgage from a qualifying lending institution, the balance will be provided by the Agency and housebuilder, to be repaid once the house is sold.

Read what to do if you can’t pay back your debt.

The new laws for debt collectors including Homebuy Loans

It is hardly surprising that so many people are facing debt issues these days. Prior to the new laws being brought into force, the lending industry was as high as £2 billion, and this was a result of irresponsible lending and exceedingly high interest rates.

Unfair practices were identified by the Financial Conduct Authority and these resulted in some of the biggest companies in the industry receiving huge fines, and even being put out of business in some cases. One of the biggest lending companies, Wonga was fined £220 million, and unsurprisingly, ended up going bust! Other companies such as Quickquid also ended up with a huge fine of £18 million.

The reason for the big fines was that it was discovered that these lending companies, had failed to assess customers efficiently during their loan application received a refund. The new law worked and following the changes to the law the number of loans which were being issued dropped from 10 million to 1.8 million and lenders also fell from 240 to 60.

If Homebuy Loans did not follow any of the laws below, then you could claim for a refund

Full Refund

Law #1: the loan must have been affordable

Out of the new laws, a lack of affordability checking is one that has had the most success stories with readers for receiving a refund. The Financial Conduct Authority has responsibility for ensuring lenders in the UK are following regulations and as part of this, lenders are supposed to carry out the relevant affordability checks. Lenders must be stringent when they are assessing creditworthiness, and should not be allowing borrowers to sign for loans, with regarding their ability to pay it back.

The law also states that repayments should always be “sustainable”. This aspect of the law means that you should be able to make repayments on time while also being able to adhere to reasonable commitments (eg. such as rent and bill) and the borrower should not need to borrow more money in order to afford the repayments.

The repayments of the loan should always be affordable when other expenses are taken into account, such as rent, bills, food, car. If you have not been able to afford repayments of your loan, or you have found yourself in a position were you are taking out another loan to cover the repayments (robbing Peter to pay Paul) then you could claim for a refund! See my simple guide for doing so here

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 Law #2: caps on interest and charges

The caps on interest and charges works well with the other law #1 on affordability, although technically you can claim for law #2 without doing it with law #1. The Financial Conduct Authority designed to introduce a price cap, which was designed to protect borrowers from facing excessive charges. These include:

  • A cost cap of 0.8% per day on the amount of loan which has been borrowed – this is a combination of both interest and all fees charged.
  • A cap on default fees of £15 – following a default interest may still be charged, but it cannot be more than the the original rate of 0.8% per day.
  • A complete cost cap of 100% – according to the law, you should not be asked to repay more than 100% of the money you have borrowed.

The cost cap limits apply to all credit agreements with an interest rate of 100% or more and that are supposed to be either fully or substantially repaid within a year.

There are also other laws which came into force in May 2017. According to this law, lenders must offer details of their products on a price comparison website, which should be authorised by the FCA. Borrowers must also be given a summary of the cost of borrowing.

If Homebuy Loans UK are in breach of any of these laws and they have attempted to charge you more than they should, the credit agreement would become unenforceable and they will not be able to make you repay the loan! You would have a strong case to claim money back

Law #3: Continuous Payment Authority – what you need to know

In most cases,loan companies will try to get you to repay the debt through a Continuous Payment Authority (CPA). With a CPA, the company has permission to take any sum of money they wish from your bank, whenever they want. They should always inform you before debiting your bank account, for obvious reasons, but there are many lenders who fail to carry out this important step. This results in borrowers not being aware that money has left their account until they happen to see it on their next bank statement.

If you are struggling with important payments such as your rent, mortgage or utility bill, and you find that the money is suddenly taken by Homebuy Loans UK ahead of these bills, you could end up facing serious trouble.

The new regulations mean that, should the CPA fail to be paid on two occasions, the lender must not try any further requests to take money from the borrowers account.

There are other rules regarding the amount of money the lender can take using a CPA. The lender is not allowed to take partial payments. If you don’t have enough money in your account to cover the full amount of the payment due, they must not take anything. You can, of course, agree that they take a partial payment, but you must have given them explicit permission in advance for them to be able to do so.

If they do attempt to make more than two requests or they take a partial payment, and you have not given them permission to do so, they are in breach of regulations and you have the right to make a complaint and put in a claim. 

What if you are unable to make your next repayment?

If Homebuy Loans UK are legitimate in their practices, but you are simply unable afford to repay the loan, there are some steps you can take to protect yourself.

If you already have a standing order or direct debit set up, you can contact your bank and request that they cancel these, or you can do the process online. As a result, Homebuy Loans UK will not be able to collect any payments automatically and you will keep control of your bank account. It is highly likely that the bank may advise you to let Homebuy Loans UK about your plans, but it is important to remember that you do not have a legal obligation to do so. In doing this, Homebuy Loans UK will not be able to take any payments without permission.

Regardless of this, you will still need to pay the money to Homebuy Loans UK, so you must speak to them directly about the situation. You may be tempted to just ignore the contact from the lender, but it better not to bury your head in the sand. Your should always make contact with Homebuy Loans UK and explain your financial situation to them, including any problems you are facing. They have a responsibility to treat you fairly, so you should be able to come up with a suitable repayment plan that suits your circumstances.

By law, lenders must:

  • Provide you with information on where you can obtain free independent debt advice
  • Hold off debt recovery for a period of time that suit the borrower, while an arrangement is set up to pay it back.
  • Giving you ample time to repay the loan, possibly freezing interest and additional charges.

I’ve written more about what to do if you can’t pay back your loan here.

Do you wish to make a claim?

The Financial Ombudsman Service received a staggering 10,529 complaints about loans of these kinds in 2017. There are many more than this though, as some would be resolved without them being escalated to the Financial Ombudsman Service. If you are facing these issues, you are not along.

If Homebuy Loans UK has treated you in a way which is not in-keeping with the regulations, you could be entitled to receive a refund, even if the loan has been paid within the last six years. In this case, you should expect to receive a refunded on all the interest you have paid on the loan, together with any additional charges, plus 8% interest on all refunds. This may result in you receiving £1,000’s, in some cases.

I’ve had 100s of success stories from readers who have followed the simple templates in my guide.

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About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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