We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Barclays FirstPlus - why customers should complain
Options
I would urge all Barclays First Plus customers to take note of the text below. Apologies if it's long but the full implications of Barclays actions are not being felt yet. Once interest rates start to rise it may be too late and you could lose your home.
Anyone interested in joining the fight or simply wants to read more please visit www.firstpluscomplaints.co.uk
They are a loss making business that are no longer offering new loans but are a trading entity collecting and administering existing loans. They are now noted as a Going Concern in their latest accounts and have relied on a letter of support from Barclays to satisfy the requirements of their auditors.
PPI - FP have an £8m provision in their accounts to deal with compensation payments they believe they will have to make to customers who complain over missold PPI.
Interest rates - FP have blamed everything they can for not reducing rates. They have blamed house prices, competitor rates etc and justified their actions by declaring they can do as they like in the application of their "commercial judgement". Their accounts state clearly that their own loan facilities are linked to B of E base so their own costs have plummeted this last yr and they have chosen not to pass this on to customers in a clear attempt to increase the gap between interest income and expense.
They increased the gap from £50m to £90m last yr to subsidise the losses in other areas and whilst they "believe" this is OK it clearly breaches UCCT guidelines. They dish out excuses but we know the score and their accounts give it all away. Without increasing the gap the business would have lost some £50 -£60m last yr. With base rate at 0.5% this gap will now be near £150m and this is enough to keep the business trading acceptably going forward and this is the only reason Barclays have supported in writing and by £9m of bail out. Now this gap exists, when rates go up, so must customer APRs.
Evidence shows that up until last yr, APRs pretty well moved in line with bank base and as this is their own funding base, that makes sense. The goalposts have clearly changed.
Publicity - the BBC Moneybox programme in an interview regarding FP. A compliance expert deemed their interest rate clause to be in breach of unfair contract regulations, the bargain so one sided as to be unfair and could question the enforceability of the loan. FP had every opportunity to defend their corner and answer the questions posed but simply stated "we are doing nothing wrong". http://news.bbc.co.uk/1/hi/programmes/moneybox/8146083.stm
Regulators - the second charge market lenders know they sit between many stools and as such escape the spotlight of mortgage regs and also the regs of the CCA for many loans. The arrogance we have all seen from lenders in this field has been such as they have deemed themselves untouchable and it is difficult for regulators to take ownership. It has been pointed out to the FLA that FP have breached its Lending Code, the FLA took this to FP and essentially allowed them to not answer questions regarding the calculation of interest rates, which the code says the lender must disclose if asked. They allowed FP to say how they applied interest to the loan which is a completely separate point in the Lending Code and allowed them to hide behind "commercial sensitivity". This is appalling as everyone the info would be sensitive to (i.e. former competitors) knows exactly how each company works and as they are no longer offering new loans, who exists to hide this "big secret" from?
OFT - after being passed around from FLA to FSA and now to OFT, the remit of Unfair Contract Clauses falls under their remit. This is not about assessing the actual loan rate but their interest rate clause. They now have a weight of evidence from the accounts of FP, the evidence of customer experience, the change in rate letters from FP (that used to say "due to change in BofE base etc, then changed to "changes in interest rates that may affect our decision" that now say "changes in our underlying costs" -why change them I wonder?), compliance expert views and hundreds of customers that are gathering awareness that change may be possible and complaining accordingly.
The recent accounts completely explains their behaviour and shows their actions are directly linked to utilising the interest rate clause to directly improve their gross income profit position - a clear contravention of UCCT. The interest rate clause reads...
"We may from time to time vary our interest rates. 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." Some have a reference to FHBR, others, pre 2005 do not.
The market perception of variable is that loan rates will move in line with a change in one of the publicised benchmark rates that exist, namely Bank of England base rate, LIBOR or FHBR. In the first years of agreements, changes in interest rate followed changes in Bank of England base rate and many customers hold letters indicating a link between the changes in bank base and FP loans. It is acknowledged within the accounts of First Plus that their lending costs are linked to Bank of England base rate.
In recent times, since the falling trend in base rates, First Plus have refused to change interest rates, disassociating themselves from any link to ANY base rate and citing changes in house prices and competitor loan rates as justification for their actions. The truth is, these matters bear no consequence to their underlying funding costs and are simply using these excuses to portray "commercial judgement" when in truth they are manipulating the interest clause to their own gain, to the detriment of customers and changing the nature of the bargain completely in their favour.
The accounts show they are operating a "one sided bargain" in the application of their interest rate terms to the detriment of customers. Their accounts show:
1 the business is now noted as having "Going Concern" basis and parent co Barclays has had to issue letter of continued support
2 other income (i.e. PPI ) has dropped as the company is no longer offering new loans thus the only source of true income is the difference between interest income and interest expense. Any reference made to remaining "competitive" is thus irrelevant, unless those companies involved are undertaking collective price fixing practices.
3 their own loan funding is linked to Bank Base (as noted in their accounts) and as such their own funding costs have dropped dramatically in the last year
4 they have distanced themselves as far as possible from linking customer rates to base rates when this was historically the case
5 their accounts show they have almost doubled the gap between their interest income and interest cost through the manipulation of their terms.
6 even with the manipulation they still lost £20m and without it they would have lost in excess of £50m. Barclays has had to inject £9m to maintain liquidity.
It is clear they are using the scope within their terms and conditions for "commercial judgement" to fundamentally manipulate the interest charged to customers to cover their own losses in other areas. Now they have created this gap between income costs and income, they have no choice but to pass on future changes in Bank of England base rate to customers as they have no ability to be profitable without doing so.
With specific regard to how this breaches Unfair Contract Clause Terms: -
1. UCCT clause 5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
The process used by First Plus to apply rate increases and avoid rate decreases has clearly led to a significant imbalance in rights to customers detriment.
2. UCCT Clause 7. - (1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language.
(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12.’
There is no fair and open dealing as they will not disclose how or why they calculate / change their rates with any practical application. When asked directly or via the FLA they simply re-quote the interest rate clause which is vague and essentially states they can do as they please by applying their "commercial judgement". Their commercial judgement has seen them: -
unable to offer new loans,
seen them lose £50m in the last 2 trading years,
seen them face a barrage of missold PPI claims (and have huge provisions in accounts for the settlement of current claims),
seen them be noted now as a Going Concern,
seen them have to note Secret Commission allegations,
seen them requiring a Letter of Support from Barclays who have also had to bail them out to the tune of £9m.
I am struggling to come to terms with their ability to apply "commercial judgement" in anything other than a self supporting manner.
3. Where 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. This is self explanatory and evidenced in the accounts.
4. The compliance expert appointed by the BBC on its recent Moneybox programme, Adam Samuel, noted that there were clear breaches of Unfair Contract Clause terms and as such the enforceability of the loan may be called in to question.
Had First Plus taken anytime to explain how they would apply the term variable to my loan at point of sale, knowing that they would be operating their loan outside of market understood norms, then I simply would not have entertained any level of loan with them.
Anyone who has not yet complained to the OFT re FP then please use the above information and complain immediately. If you don't then be prepared for increases in your APR once BoE rates rise.
Anyone interested in joining the fight or simply wants to read more please visit www.firstpluscomplaints.co.uk
They are a loss making business that are no longer offering new loans but are a trading entity collecting and administering existing loans. They are now noted as a Going Concern in their latest accounts and have relied on a letter of support from Barclays to satisfy the requirements of their auditors.
PPI - FP have an £8m provision in their accounts to deal with compensation payments they believe they will have to make to customers who complain over missold PPI.
Interest rates - FP have blamed everything they can for not reducing rates. They have blamed house prices, competitor rates etc and justified their actions by declaring they can do as they like in the application of their "commercial judgement". Their accounts state clearly that their own loan facilities are linked to B of E base so their own costs have plummeted this last yr and they have chosen not to pass this on to customers in a clear attempt to increase the gap between interest income and expense.
They increased the gap from £50m to £90m last yr to subsidise the losses in other areas and whilst they "believe" this is OK it clearly breaches UCCT guidelines. They dish out excuses but we know the score and their accounts give it all away. Without increasing the gap the business would have lost some £50 -£60m last yr. With base rate at 0.5% this gap will now be near £150m and this is enough to keep the business trading acceptably going forward and this is the only reason Barclays have supported in writing and by £9m of bail out. Now this gap exists, when rates go up, so must customer APRs.
Evidence shows that up until last yr, APRs pretty well moved in line with bank base and as this is their own funding base, that makes sense. The goalposts have clearly changed.
Publicity - the BBC Moneybox programme in an interview regarding FP. A compliance expert deemed their interest rate clause to be in breach of unfair contract regulations, the bargain so one sided as to be unfair and could question the enforceability of the loan. FP had every opportunity to defend their corner and answer the questions posed but simply stated "we are doing nothing wrong". http://news.bbc.co.uk/1/hi/programmes/moneybox/8146083.stm
Regulators - the second charge market lenders know they sit between many stools and as such escape the spotlight of mortgage regs and also the regs of the CCA for many loans. The arrogance we have all seen from lenders in this field has been such as they have deemed themselves untouchable and it is difficult for regulators to take ownership. It has been pointed out to the FLA that FP have breached its Lending Code, the FLA took this to FP and essentially allowed them to not answer questions regarding the calculation of interest rates, which the code says the lender must disclose if asked. They allowed FP to say how they applied interest to the loan which is a completely separate point in the Lending Code and allowed them to hide behind "commercial sensitivity". This is appalling as everyone the info would be sensitive to (i.e. former competitors) knows exactly how each company works and as they are no longer offering new loans, who exists to hide this "big secret" from?
OFT - after being passed around from FLA to FSA and now to OFT, the remit of Unfair Contract Clauses falls under their remit. This is not about assessing the actual loan rate but their interest rate clause. They now have a weight of evidence from the accounts of FP, the evidence of customer experience, the change in rate letters from FP (that used to say "due to change in BofE base etc, then changed to "changes in interest rates that may affect our decision" that now say "changes in our underlying costs" -why change them I wonder?), compliance expert views and hundreds of customers that are gathering awareness that change may be possible and complaining accordingly.
The recent accounts completely explains their behaviour and shows their actions are directly linked to utilising the interest rate clause to directly improve their gross income profit position - a clear contravention of UCCT. The interest rate clause reads...
"We may from time to time vary our interest rates. 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." Some have a reference to FHBR, others, pre 2005 do not.
The market perception of variable is that loan rates will move in line with a change in one of the publicised benchmark rates that exist, namely Bank of England base rate, LIBOR or FHBR. In the first years of agreements, changes in interest rate followed changes in Bank of England base rate and many customers hold letters indicating a link between the changes in bank base and FP loans. It is acknowledged within the accounts of First Plus that their lending costs are linked to Bank of England base rate.
In recent times, since the falling trend in base rates, First Plus have refused to change interest rates, disassociating themselves from any link to ANY base rate and citing changes in house prices and competitor loan rates as justification for their actions. The truth is, these matters bear no consequence to their underlying funding costs and are simply using these excuses to portray "commercial judgement" when in truth they are manipulating the interest clause to their own gain, to the detriment of customers and changing the nature of the bargain completely in their favour.
The accounts show they are operating a "one sided bargain" in the application of their interest rate terms to the detriment of customers. Their accounts show:
1 the business is now noted as having "Going Concern" basis and parent co Barclays has had to issue letter of continued support
2 other income (i.e. PPI ) has dropped as the company is no longer offering new loans thus the only source of true income is the difference between interest income and interest expense. Any reference made to remaining "competitive" is thus irrelevant, unless those companies involved are undertaking collective price fixing practices.
3 their own loan funding is linked to Bank Base (as noted in their accounts) and as such their own funding costs have dropped dramatically in the last year
4 they have distanced themselves as far as possible from linking customer rates to base rates when this was historically the case
5 their accounts show they have almost doubled the gap between their interest income and interest cost through the manipulation of their terms.
6 even with the manipulation they still lost £20m and without it they would have lost in excess of £50m. Barclays has had to inject £9m to maintain liquidity.
It is clear they are using the scope within their terms and conditions for "commercial judgement" to fundamentally manipulate the interest charged to customers to cover their own losses in other areas. Now they have created this gap between income costs and income, they have no choice but to pass on future changes in Bank of England base rate to customers as they have no ability to be profitable without doing so.
With specific regard to how this breaches Unfair Contract Clause Terms: -
1. UCCT clause 5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
The process used by First Plus to apply rate increases and avoid rate decreases has clearly led to a significant imbalance in rights to customers detriment.
2. UCCT Clause 7. - (1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language.
(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12.’
There is no fair and open dealing as they will not disclose how or why they calculate / change their rates with any practical application. When asked directly or via the FLA they simply re-quote the interest rate clause which is vague and essentially states they can do as they please by applying their "commercial judgement". Their commercial judgement has seen them: -
unable to offer new loans,
seen them lose £50m in the last 2 trading years,
seen them face a barrage of missold PPI claims (and have huge provisions in accounts for the settlement of current claims),
seen them be noted now as a Going Concern,
seen them have to note Secret Commission allegations,
seen them requiring a Letter of Support from Barclays who have also had to bail them out to the tune of £9m.
I am struggling to come to terms with their ability to apply "commercial judgement" in anything other than a self supporting manner.
3. Where 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. This is self explanatory and evidenced in the accounts.
4. The compliance expert appointed by the BBC on its recent Moneybox programme, Adam Samuel, noted that there were clear breaches of Unfair Contract Clause terms and as such the enforceability of the loan may be called in to question.
Had First Plus taken anytime to explain how they would apply the term variable to my loan at point of sale, knowing that they would be operating their loan outside of market understood norms, then I simply would not have entertained any level of loan with them.
Anyone who has not yet complained to the OFT re FP then please use the above information and complain immediately. If you don't then be prepared for increases in your APR once BoE rates rise.
0
Comments
-
Halifax,
I am no expert, but I think you would find it hard to argue that a loss making business is somehow profiting from not reducing its APR?
Prior to October last year, the base rate had never dropped through 3.5% so Barclays would argue that exceptional conditions currently apply.
It would also be hard to argue that Barclays funding costs are linked to base rate:
1. It earns a lot less on current accounts than it used to (paying 0.1% on current accounts when base rate was 5% earned them a lot more)
2. Historically Barclays would have to offer savings rates of perhaps 0.5% above base rate to attract funding. I cannot see a 1% savings rate currently being a best buy.
2nd charge lending should never have been allowed to get so big and should have been regulated. Single premium PPI policies should have been outlawed long before the OFT ruling earlier this year.
Hopefully base rates will only start to rise once house prices have stabilised and once funding costs are lower so barclays will not have to raise interest rates too much.
To be honest they would be shooting themselves in the foot if they did as people with big loans and no equity would simply default rather than live in poverty.
Good luck with your fight, but in my view you should focus your energy on getting any PPI refunded and saving as much as possible to repay firstflus as soon as you can.
R.Smile
, it makes people wonder what you have been up to.0 -
Thanks for your thoughts Rafter.
I have already reclaimed the PPI on the basis that it was mis-sold due to pre-existing cover. Others are still reclaiming hence the £8m provision in the accounts.
I believe the argument is irrefutable. Ignoring Base Rate and using Finance House Base Rate as that is the term using in my term & conditions, - over the last 12 months BFP have increased their “profit margin” on my loan repayments from 68% to 820%. They have done this because it is “prudent & efficient” of them to do so.
This “profit” is measured on the variance above the Finance House Base Rate that BFP lent me money on.
The FHBR was 5.00% in January 2006. BFP lent me money at 8.4%. This provided them with a 68% profit (3.4 / 5.00).
My current interest rate is 9.2% with a corresponding FHBR of 1.0%. This is a 8.2% variance affording them a profit of 820% (8.2 / 1.1).
As I said this is irrefutable as for every £1,000 they are currently making £82 a year “profit” – based on FHBR. When I took out the loan they expected to make £34. In my case this equates to over £2000 extra profit a year. Extrapolated across their loan book and you can see the multi-million pound profiteering, again as detailed in their accounts. As said above they have had to do this to compensate for losses in PPI income and commissions.
To be honest the argument of balancing saver interests doesn’t hold up as this subsidiary of Barclays was solely a secured loan provider. I hope they do use this as an excuse as it would surely be deemed unfair under the UTCCR if they said they were doing that.
I totally agree with you re the secured lending market, but I along with many other have made mistakes and got into financial trouble. I thought at the time that this was the right solution, it was sold to me that way. I can pay this debt, at the rate it was sold to me at whether that be 8.4% or 3.4% above FHBR. What I would struggle to do is pay 15% just to keep BFP in business.
Remember, analysis of their accounts shows that they need to maintain this gap between interest income and interest expense, if they don’t they go bust. Their business model has failed as it was based on PPI income and commissions. Without this income and no new customers their current customers are their only source of income.0 -
Based on this mornings wonderful letters i thought i would bump this up. This rise will probably mean for most that they are brought back in line with the rate you were paying 12 months ago. This is what Clause 7 of the T&C's mean with regared to FHBR.
Be warned, once FHBR rises then the real increases will start.
If you haven't complained already, do so now.
This company (BARCLAYS) are a disgrace.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 350.9K Banking & Borrowing
- 253.1K Reduce Debt & Boost Income
- 453.5K Spending & Discounts
- 243.9K Work, Benefits & Business
- 598.7K Mortgages, Homes & Bills
- 176.9K Life & Family
- 257.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards