Belfast Telegraph

AA's charge for receipts drives membership mad

By Paul Gosling

Question: My wife and I are members of the AA and have been for many years. Part of our cover relates to driving for business purposes and part for private use.

When I renewed my policy, I asked the AA to send us a receipt for our business accounts, along with the new membership cards. I was told that the AA would send this, but only on payment of a £15 fee! What made it worse was that the AA persuaded my wife on the phone to take on additional cover. Doesn't the AA have an obligation to provide free receipts? RH.

Answer: A spokesman for the AA says: "There is no VAT on AA membership, so receipts aren't issued as standard. If someone requests one, it has to be processed manually, so we apply an administration charge, as with other ad-hoc requests - these charges are laid out in our terms and conditions." However, given your long-standing membership, the AA is sending you a receipt free of charge. You are not content with this response, as the AA is not willing to change its policy of charging for receipts other than where charges are waived as a goodwill gesture.

Question: I have a fixed interest rate mortgage with Halifax. The present interest rate is 5.99% - considerably higher than the standard variable rate of 3.5%. It is a three-year loan, which expires in August next year. I can get out of it by paying a penalty, which is what would happen if I were to sell the house now. When I was in a Halifax branch recently, I was told I could also come out of it by breaking the terms of the contract, for example by paying off some of the mortgage loan in a lump sum, provided that this was greater than a certain percentage of the loan. But if I were to break another condition of the loan - for example, missing a monthly instalment and deliberately going into arrears - would the interest rate automatically revert to the standard rate, with no further penalties? MD.

Answer: Ray Boulger of John Charcol mortgage brokers says: "This won't work because although mortgage contracts often say that if the borrower defaults the lender can revert the mortgage to its standard variable rate (SVR), this will be at the lender's option and Halifax clearly wouldn't exercise its option to reduce the rate from 5.99% to 3.5%! I suspect the reader misunderstood what he was told in the bank branch, maybe because it wasn't explained clearly. As with most lenders, Halifax allows overpayments of up to 10% per annum without incurring an early repayment charge (ERC). Any overpayments in excess of 10% per annum would incur the relevant ERC. Assuming the reader hasn't made any overpayments in the last year, he could pay back anything up to 10% of his mortgage now without incurring an ERC.

If his mortgage is on an interest-only basis he could also ask Halifax to convert it to a repayment mortgage, which would mean each month he is paying back some of the capital, in addition to the 10% ERC free facility. If the mortgage is already on a repayment basis but he could afford to increase his payments beyond the 10%, he could ask Halifax to shorten the repayment term, which would increase the amount of capital repaid each month. If he does this, or switches from interest only to repayment, Halifax would normally charge him an administration fee. Halifax is very keen to get borrowers off interest-only mortgages, so if he is on interest only he could try offering to switch to repayment if it waives its normal fee! The reader should only consider switching from interest only to repayment, or shortening the term if already on repayment, if he is absolutely confident he can afford the higher payments, even when interest rates increase, although of course he may be able to remortgage on to a different basis after his fixed rate ends next year. He should assume that if he switches from interest only to repayment, or shortens the term, it will be a one-way trip as there is no guarantee Halifax would allow him to switch back if the higher payments become a problem for him in the future. Deliberately missing a mortgage payment would be a stupid thing to do, because it would be recorded on his credit file and would probably result in him either being denied credit or only offered it at a higher than normal rate."

Question:I am having difficulty checking my credit status with credit reference agency Experian. There is one item on my record marked "default", while the others are shown as "satisfactory". There was a disputed bill with Tesco relating to a fraudulent transaction, which is now resolved. But Experian is marking up the problem as being with Egg, which is why the matter is not shown as resolved. I have already sent Experian a letter from Tesco to confirm that this disputed item has been cleared and requested that it be removed from, or corrected in, my credit report. I also want to end my subscription of £5.99 per month for a credit report, which I don't need other than to correct this error which should not take almost three months to do. SB.

Answer: Experian says it contacted Tesco earlier this month to confirm your explanation and Tesco "replied within a few days asking us to amend the account". James Jones, a spokesman for Experian, said: "This has been actioned and now the account is marked as settled with a perfect payment record." Experian adds that while it has cancelled your CreditExpert membership, you did not need to join its service in order to correct your credit status report: "The law gives consumers the right to have errors rectified on any credit report they have received from us and there is certainly no obligation to continue monitoring your credit report just because data on it has been disputed."