Consolidated FP loan question?

[Surfer]

Okay I have just checked my SAR again. In the T & Cs of the contract with Firstplus it clearly states the following;

We may from time to time vary our interest rate. We may increase or reduce our interest rate for one or more of the following reasons, namely to reflect a change which has occurred or which we reasonably expect to occur in interest rates generally or to ensure that our business is carried on prudently efficiently and competitively.

On or about the 5th December 2006 we received a letter advising us that our interest rate will be increasing from 8.9% to 9.4% due to an increase in interest rates by Bank of England. This is clearly stated on the letter.
On or about the 14th April 2007 we received a letter advising us that our interest rate will be increasing from 9.7% to 10.2% due to an increase in interest rates by Bank of England. This is clearly stated on the letter. However not sure where the extra .3% came from?
On or about the 17th July 200 we received a letter advising us that our interest rate will be increasing from 10.2% to 10.5% due to an increase in interest rates by Bank of England. This is clearly stated on the letter.
During August 2008 we received an undated letter advising us that our interest rate will be increasing by 0.3% 10.5% as from 13/08/2008 but there is no mention of due to a change in interest rates by Bank of England.
Up to now they have used the BOE as an excuse to raise interest rates as per what we were told when we took out the loan. suddenly when BOE rates fall the reason given is "increased underlying costs associated with borrowing and prevailing market conditions".
It seems that there is a very strong case under Unfair Terms in Consumer Contracts for us to pursue this as FP may have misled us regarding the interest rate and we are paying over the top. We also have the missing 0.3% increase that we were never informed about.
The loan was initially for £53000, but we paid off a large chunk however still owe about £4000. When we paid off a large amount in Feb 2006 we were left with o/s balance of £5700.
The interest increases were all after Feb 2006 when we made the large payment and we would be claiming for the difference between 10.5% and what we feel the increase rate should be i.e if it went up from 8.9% to 10.5% based on BOE interest rates, correspondingly it should have fallen by the same rate.
Currently we are paying £70 per month regular as clockwork, but still have another 76 payments of £70 due or £5320 to pay. If we can reduce or even get rid of it, we would be very happy!
Using UTCC do you think we would we be able to claim for the difference in interest rates in a small claims court?

[charitynjw]

Re: Consolidated FP loan question?

Hi Surfer,

I would have thought that the ability to adjust interest rates is a core term in the agreement. (Their cost of borrowing being the usual reason)

They would throw Reg 6.2 & Office of Fair Trading (OFT) v Abbey National plc & Ors [2009] UKSC 6 (25 November 2009) at you.

[Surfer]

Re: Consolidated FP loan question?

Hi Surfer,

I would have thought that the ability to adjust interest rates is a core term in the agreement. (Their cost of borrowing being the usual reason)

They would throw Reg 6.2 & Office of Fair Trading (OFT) v Abbey National plc & Ors [2009] UKSC 6 (25 November 2009) at you.

By the same token under UTCC

Regulation 10.4
“A term which merely says that variations will only be 'reasonable' or will only be made 'reasonably', is unlikely to be any fairer than one which contains no such qualification, unless there can be little doubt in a reasonable consumer's mind as to what sort of variation, broadly speaking, such wording allows, and in what circumstances. Where the criteria of reasonableness are vague, or clearly meant to include the best commercial interests of the business, there will be scope for the supplier to change the bargain unfairly to the detriment of consumers, simply on the basis that he needs to protect his profit margins."

I would like to think that they will need to disclose to a court the reasons for maintaining the high interest rate when BOE rate has dropped.

[charitynjw]

Re: Consolidated FP loan question?

By the same token under UTCC

Regulation 10.4
“A term which merely says that variations will only be 'reasonable' or will only be made 'reasonably', is unlikely to be any fairer than one which contains no such qualification, unless there can be little doubt in a reasonable consumer's mind as to what sort of variation, broadly speaking, such wording allows, and in what circumstances. Where the criteria of reasonableness are vague, or clearly meant to include the best commercial interests of the business, there will be scope for the supplier to change the bargain unfairly to the detriment of consumers, simply on the basis that he needs to protect his profit margins."

I would like to think that they will need to disclose to a court the reasons for maintaining the high interest rate when BOE rate has dropped.

Hi Surfer

You would then need to attack 'commercial confidentiality'
They would possibly claim that publicising their business model would be to the detriment of said business.
(Don't get me wrong, here; I'm with you all the way!)

[charitynjw]

Re: Consolidated FP loan question?

"None of you nowadays will remember the trouble we had - when I was called to the Bar - with exemption clauses. They were printed in small print on the back of tickets and order forms and invoices. They were contained in catalogues or timetables. They were held to be binding on any person who took them without objection. No one ever did object. He never read them or knew what was in them. No matter how unreasonable they were, he was bound. All this was done in the name of "freedom of contract." But the freedom was all on the side of the big concern which had the use of the printing press. No freedom for the little man who took the ticket or order form or invoice. The big concern said, "Take it or leave it." The little man had no option but to take it. The big concern could and did exempt itself from liability in its own interest without regard to the little man. It got away with it time after time. When the courts said to the big concern, "You must put it in clear words," the big concern had no hesitation in doing so. It knew well that the little man would never read the exemption clauses or understand them. It was a bleak winter for our law of contract."

Lord Denning MR in George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd^[

(Ripped off from Wikipedia :grin

[Surfer]

Re: Consolidated FP loan question?

My issue would be getting the BoE rate changes since 2006 and the date that they were implemented. Then I would need to look at corresponding it with the rate at which FP increased their interest rate, for example, if the BoE rate went up by 1% and FP increased theirs by 1% then by the same token when the rate came down FP should have lower theirs as basically the loan was a second mortgage. This was a reason given for the variable rate when we signed up. We were told that the rate could go below the 8.9% or above depending on BoE rate changes.
The biggest issue for me would be calculating the difference in interest so that I can make a claim in the Small Claims Court using UTCC.

[Khonsu]

Re: Consolidated FP loan question?

I was made aware that the way in which their interest rates are calculated is based on the Finance House base Rate (FHBR). However "any changes to the Bank of England interest rates or FHBR could affect the rate" FirstPlus charge their customers. In June 2008 to June 2009 the FHBR reduced it's rate from 6% to 1% and has been at this, or 1.5%, since. I am fairly certain this was not passed on to FirstPlus customers.
aw: