Secured Loans & Variable Interest Rates

I have a secured loan with First Plus and have a number of issues. However, part of my complaint to them centres around the way in which my repayment has changed since inception. I took out a £35k loan that attracted a PPi premium of some £6900, giving me a day one "advance" of £41900. My repayments were £353 day one. This was in Nov 2003. From Apr 2004 when BoE started to change base rates, my payments also started to increase to
£366 (Apr 2004)(base rate to 4% in Feb),
£373 (Jun2004)(base rate to 4.25% in May),
£388 ( Aug 2004)(base rate to 4.5 in June),
£393 (Jan 2005)(base rate to 4.75 in Oct 04),
£389 (Oct 2005)(base rate down to 4.5 in Aug 05)
£394 (Jan 2006)(base rate unchanged)
£400 (Mar 2006)(
£414 (Jan 2007)(base rate to 5 in Nov 06)
£433 (Mar 2007)(base rate to 5.25 in Jan 06)
£446 (May 2007)(base rate to 5.5% in May)
£455 (Aug 2007) (base rate to 5.75% in July)

since then there have been 3 increases down to 5% and no change in my repayment.

In my conversation with them they first said it was not linked to bank base, but I said your increases are pretty well in line with BoE movement. I said well it is variable so it is linked to something.

I said why hasn't it come down since July 07 they thne talked about thier own costs of borrowing. I said if you are linking me to LIBOR then you have never made that clear and secondly, can you demonstrate the movements in LIBOR that justified the increases in the first place.

Then they mentioned a caveat re FHBR that was in their terms.

I ended the conversation there saying I would undertake further research and put my findings in writing to them.

From what I see in here this is not simply a First Plus issue, many are being hit with the same scenario but are trying to be bamboozled by lenders talking of effects on funding costs etc etc.

Are the terms of my contract with FP able to be proven unfair by what is happening. If so, how do I go about it as I am passionate and skilled enough to take this fight up with them, either directly or via the Ombudsman.

Now rates have come down to 3% and there is no movement whatsoever in terms of rate. They have told me that their ts and cs allow them to do what they like with rates. My view is that they use the natural rate cycle to get all loans in the 12% and above region no matter what they bring them in on.

BoE rate rises are always the trigger upwards but "our rates have nothing to do with BoE rate" when they move down. LIBOR has now dropped too, so what move? NONE. They state they are VARIABLE loans but as they are not varialbe in the sense the market would understand them to be then I deem their term unfair. I work in commercial finance and variable to me means it moves in line with base, all they said at sign up was VARIABLE, they never stated it would work in a pequliar and self benefitting way otherwise I would simply not have signed.

I am about to reply to them and state that I will now take my challenge with them to FOS service as I deem their term to be unfair, as it is clearly not illegal. Whether I make any progress or not is another matter but it appears I am not alone in this and greater pressure will not do any harm.

ANy thoughts out there?"

I have now drafted the following and will be sending it to First Plus tomorrow

"
Thank you for your reply to my recent issue. As you state, the response from FirstPlus may not “be the answer I wanted”, however it is almost to the word exactly what I expected and it is this avoidance of the issue that concerns me.

As you state you have sold me a variable rate agreement and in the mortgage world this carries with it a certain meaning and understanding that First Plus know all to well. When you make your confirmations over the phone you do no more than mention that this agreement is variable rate and explain nothing more than that, which I feel mis-sells the agreement and its mechanism. My dialogue with yourself and others has clearly indicated a lack of understanding as I have had FHBR and LIBOR attempted to be thrown at me and a point blank refusal of any link with Bank of England base which has been the clear justification, as witnessed in letters, every time repayments have gone up.

This underlines the misuse of the term variable as the mindset of the public and myself would be that upward movement in Bank base would mean loan repayments increased. When rates move the other way, suddenly Bank base is nowhere to be seen as a measure used. My understanding, along with many I am in contact with, is that you carry a completely different perception of the term “variable”, are 100% understanding of how your rates will change, you know it is different to that of the population, yet do nothing to explain the nature in which your “variable rate” loan affects people. It is this lack of explanation that I feel breaches moral and ethical levels as this should be emphasised verbally at point of sale to make sure people understand. It was not explained to me and I would welcome copy transcripts of my sale process to clarify this. I would add at this stage that your introducing brokers have managed to corrupt their tape of dialogue with me, as confirmed when I challenged them about the mis-selling of my PPI. Be under no illusion that to simply say “you were aware of the terms and conditions when you signed the agreement” will in anyway be an acceptable excuse for, what in practise is proving, a blatantly unfair term.

Whilst you will not disclose the information, my guess is that people are enticed under an attractive APR, then over time are gradually moved into the 12 -14% APR banding and then are left there throughout the course of the agreement. I have yet to speak with anyone in a position where their APR is lower, or even close to where they started, irrespective of when their loan started. Interest rate cycles fluctuate, your business model will accept that, knowing that you have a chance to increase your return over time and hold your position when the cycles move down again, using the funder favouring term in the agreement. LIBOR and Bank base have dropped significantly this last week and what has been the response from First Plus…..I still await confirmation of the significant reduction in rate and payment that would be occurring under a fair agreement. As a Barclays Bank business, it continues to maintain its AA credit rating and you will no doubt benefit accordingly from that, when underlying cost structures are calculated.

The implication is that First Plus do not / did not do enough to explain how a customer will be affected over time through taking a variable rate agreement, as such the type of loan you offer, working in a completely unique manner, you should be obligated to do more to take customers through this not just hiding behind a vague and self supporting term, which is essentially what the reply from First Plus proved.

The clear fact is that First Plus are hiding behind this vague term stating that it can do exactly as it likes, not justify what it has done, not be prepared to evidence why it has behaved as it has done, nor prove the underlying rationale to what it has done and not accept that it offers something under the banner of an industry understood term – “variable”. This is based, as you state, on the fact that it can make any decision based on what it feels (“can reasonably expect to occur”) and increase its profit margin per deal throughout the course of an agreement (“ensure our business is carried on competitively”) thus rendering your term unfair.

As has been stated, First Plus has no further interest in dealing with this matter so copies of this letter and recent correspondence / investigation will be forwarded to FOS.

In the meantime, I welcome any feedback and offer of resolution from First Plus. I will gladly receive notification of significantly reduced interest rates in line with recent market changes, that you are applying across the board if my complaint is to be proven to lack substance and truth. "