Tens of thousands of Erudio customers will begin to have interest applied to their loans after it was initially frozen last year following an investigation into historic paperwork issues.
This is a complicated issue, so we'll explain it in chronological order for ease.
When Erudio – the firm which manages the pre-1998 mortgage style student loans of around 245,000 customers – bought these from the Student Loans Company (SLC) in March 2014, it discovered the SLC had made a long-running error in correspondence sent to borrowers who were in arrears. See the SLC blunder MSE News story for more on this.
As there were concerns the SLC "potentially" breached the Consumer Credit Act (CCA) by failing to disclose arrears correctly between 2008 and March 2014, Erudio began investigating the issue.
During the investigation period, Erudio identified that some of its customers who had been in arrears between 2008 and March 2014, had received a non-compliant 'Notice of Sum In Arrears' (NOSIA) from the SLC.
Erudio later discovered that some customers had also not received a NOSIA from the SLC when they should have. So for both of these customer groups:
- From March, Erudio stopped applying interest of 3.3% (2.5% from 1 September 2014 onwards) to loans.
- Erudio deducted all interest and charges incurred during the period of potential non-compliance from the balance of affected customers.
- Last year, Erudio sent all customers who had been in arrears during the period of potential non-compliance a 'remediation pack' with corrected NOSIAs. And for some customers who didn't receive the NOSIA when they should have done, these were also sent out.
Further, as a precaution, some customer accounts, which were not in arrears at the time Erudio took them on in March 2014 but may have been in arrears in the past, also had interest charges frozen while Erudio investigated further.
What this means for you
Erudio has now concluded its review of the accounts detailed above, so here's what happens now. This applies regardless of whether you're currently repaying your loan, or are in deferment where you earn under the threshold required to make repayments:
- In arrears pre-2008: You're unaffected by this issue as the incorrect paperwork was only sent after 2008, so if you were in arrears prior to this, you would have received the correct paperwork.
- In arrears between 2008 and pre March 2014: If you've paid off your loan since it was sold to Erudio but were in arrears at some point between 2008 and pre-March 2014, Erudio says it will write to you to discuss this further.
If you've yet to pay off your loan, Erudio has refunded the interest and/or charges applied during the period of non-compliance and applied it to your account balance. It will also begin charging interest again at the start of the month after you receive a letter detailing what's happened. These are being sent from this week onwards.
- In arrears since March 2014: If you've accrued two or more months' worth of arrears at any point since March 2014, you will receive a NOSIA for the period when Erudio was investigating the SLC's error and wasn't able to send out the documentation, as well as a 'CCA Remediation' pack and letter detailing when interest will begin to be charged to your account again. Letters are being sent from this week onwards.
If you've only missed one payment since March 2014, you won't receive a NOSIA.
- Not been in arrears since 2014 (but may have been in the past): This last group refers to the customer accounts Erudio investigated as a precaution. In this case, if the interest on your account was frozen, it'll begin to be charged by Erudio again. Erudio will send you an 'Interest Reactivation Letter' from this week to let you know when the interest will be resumed. Your September annual statement will show you if and when interest was frozen on your account.
Is Erudio going to apply interest retrospectively?
No. Erudio says it won't apply any retrospective interest amounts to accounts where interest was frozen. This applies to all of the scenarios detailed above.
How much interest will be applied and from when?
The interest you'll be charged going forward is 0.9% (down from 2.5% before 1 September 2015). Interest charges will be re-started "over the coming months", but the exact date depends on when you receive a letter detailing this from Erudio.
Erudio says interest will typically be applied from the start of the month after you receive the CCA Remediation Pack and/or Interest Reactivation Letter.
See MoneySavingExpert.com's Should I repay my student loan? guide to see whether it's better to save or clear debt.
What does Erudio say?
On its website, Erudio states: "Although we have now rectified these original issues, as a consequence of the work we needed to undertake, we were unable to send subsequent CCA communications where required, until such time that the initial issue had been resolved and balance adjustments made.
"Having reviewed all accounts in light of these historic issues, we are now in a position to resume our normal processes. We have therefore begun writing to our customers who have (or had) arrears on their loan(s) since 1st March 2014 (when Erudio took over the management of the loans but was completing the initial remediation activity) to ensure they have had all the required CCA notifications.
"We are also writing to customers who are not (or who have not been) in arrears to confirm when interest will be reactivated on their account."
It adds that if customers have any questions about their accounts, they should contact it by calling 0333 003 7188 or emailing email@example.com.