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Secured Loans & Variable Interest Rates
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:rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:
it is so refreshing to see a deliciously dedicated double diehard mse devotee standing up for the rights of the banks to rip poeple of by the use of there financial might.
:rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:
do you really delete posts, how do you do that thought the site was unmoderated?0 -
Well the ombudsman does not think you have been shafted does he?0
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Some bedtime reading for those that want to know my issues. I have others regarding advertising, legal (estoppel), tracker precedent etc. Bit OTT if i post all.
UTCCR 1999
When a contract is made, obligations are accepted in return for benefits. If one party can unilaterally change agreed terms, to its advantage, the balance of the transaction is lost. So a term is likely to be unfair if it gives the supplier the right at its discretion to force the consumer to accept changes to the bargain. A right to change any term in the contract, or to vary its core terms – the price or description of the product – is particularly open to objection.
Fairness, and the law, require that consumers get what they agreed to buy. Goods, in particular, must be of the agreed description and purpose, not just of 'equivalent quality'. A right to raise prices at discretion, where consumers are locked into the contract, is also highly suspect.
At loan inception I agreed to a 8.4% APR (Variable) which at the time was 3.4% above FHBR. As it stands now I am paying 10% (9.0% above FHBR).
I have had explanation for variations ranging from base rate, house prices, equity, commercial judgement. This is clearly not true. I am in a situation now where my APR will never go below 9.2% (see Appendix 1 for explanation) but it can rise exponentially.
The UTCCR state: -
Where the supplier's freedom to vary is more restricted, there may be no unfairness. Terms which allow only technical product modifications of no significance to the consumer are usually acceptable. Even a right to make more substantial variations may be unobjectionable if the changes permitted are precisely specified, so consumers do effectively know what they are agreeing to. Alternatively, a variation clause that confers no real discretion, for instance, a right to raise prices in line with a published price index, may be fair. This applies particularly to terms in a range of specialised financial transactions terms allowing price variations due to fluctuations in an independent index, or published market rates, or currency values.
Clause 7 does not precisely specify the variations. I did not know I was agreeing to this process of varying the APR – who would, it’s so one sided? I would have no objections if my APR varied alongside an independent index, i.e. FHBR, this is what I thought I was agreeing to.
The UTCCR state: -
“A standard term is unfair if it creates a significant imbalance in the parties' rights and obligations under the contract, to the detriment of the consumer, contrary to the requirement of good faith.”
As it stands I have no rights, I have to pay what Barclays FirstPlus say. If I don’t I default and lose my home. My obligations have changed dramatically and can potentially increase exponentially should Barclays FirstPlus continue to maximise their allowable return under Clause 7.
Under the UTCCR Unfair terms are not enforceable against the consumer. To quote again from the UTCCR, “The requirement of 'good' faith embodies a general 'principle of fair and open dealing'. It means that terms should be expressed fully, clearly and legibly and that terms that might disadvantage the consumer should be given appropriate prominence.”
My contention here is: -
· Where exactly have Barclays FirstPlus “expressed fully, clearly and legibly”?
· Where have they given prominence?
Returning to the UTTCR – It states, “However transparency is not enough on its own, as good faith relates to the substance of terms as well as the way they are expressed and used. It requires a supplier not to take advantage of consumers' weaker bargaining position, or lack of experience, in deciding what their rights and obligations shall be. Contracts should be drawn up in a way that respects consumers' legitimate interests. In assessing fairness, we take note of how a term could be used. A term is open to challenge if it is drafted so widely that it could cause consumer detriment."
It is my contention that Barclays FirstPlus have intentionally taken advantage of my “weakened bargaining position, and lack of experience”. This is a cleverly worded clause that I do not believe any customer could understand. I would even question whether legal representation would have helped.
The UTCCR states,
"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 the crux of the matter. The evidence of the accounts shows that the business would essentially now be insolvent without manipulating the interest rate clause “to sustain its business”. Its underlying costs have massively reduced and there is no argument possible that they can present to change what is clearly shown within their accounts.
UTCCR 10.3c - Such a term is more likely to be found fair if there is a duty on the supplier to give notice of any variation, and a right for the consumer to cancel before being affected by it, without penalty or otherwise being worse off for having entered the contract.
I am not free to exit my contract as there are early redemption fees. Also, the price of the product on offer now has increased – that isn’t my fault. I am therefore tied into my contract.
UTCCR 12.2 Any purely discretionary right to set or vary a price after the consumer has become bound to pay is obviously objectionable. That applies particularly to terms allowing the supplier to charge a price on delivery of goods that is not what was quoted to the consumer when the order was placed. It also applies to rights to increase payments under continuing contracts where consumers are 'captive' – that is, they have no penalty-free right to cancel.
Again, I am not free to exit my contract as there are early redemption fees. Also, the price of the product on offer now has increased – that isn’t my fault. I am therefore tied into my contract. See UTCCR 12.4 below.
UTCCR 12.4 “Any kind of variation clause may in principle be fair if consumers are free to escape its effects by ending the contract. To be genuinely free to cancel, they must not be left worse off for having entered the contract, whether by experiencing financial loss (for example, forfeiture of a prepayment) or serious inconvenience, or any other adverse consequences.
UTCCR 18.1.2 An explicit right to demand payment of unspecified amounts at the supplier's discretion – for example, by way of security deposit – is particularly open to challenge. But the same objections may apply if terms are merely unclear about what will be payable. Their purpose may not, in fact, be to allow the supplier to make unexpected or excessive demands for money, but the focus of the Regulations is on the effect that terms can have, not just on the intentions behind them.
My terms were clearly unclear – any reasonable adjudication will see that.
UTCCT 19.1 Regulation 7 states: (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 …
Transparency is also fundamental to fairness. Regulation 7 says that standard terms must use plain and intelligible language. Taking account of the Directive the Regulations implement, this needs to be seen as part of a wider requirement of putting the consumer into a position where he can make an informed choice. Thus even though a term would be clear to a lawyer, we will probably conclude that it has the
potential for unfairness if it is likely to be unintelligible to consumers and thereby cause detriment, or if it is misleading (in which case its use may also be actionable as an unfair commercial practice).
I believe that all of the above clearly prove that the Terms & Conditions of my loan are in clear breach of the UTCCR 1999. They are therefore unenforceable in there current form and require regulator intervention.
Code of Practice.
www.oft.gov.uk/shared_oft/business_leaflets/general/oft1105.pdf
The activities of First Plus contravene a number of the guidelines provided.
It is stated that the overriding principles of all businesses operating shall be the need for appropriate consumer protection and fair business practice. I have asked for transparency on how First Plus calculates and decides on movement in interest rates, when previously the links to base rates were clear and in more recent times, have been “changed”.
First Plus could not be any less transparent if they tried, simply trying to justify that their “commercial judgement” applies but will not disclose any further than that because of “commercial sensitivity”.
Fair and Clear contract terms are also required in plain and intelligible English. They simply state the term “variable” at point of sale and leave you to believe the “variable” they use is the one that applies in the mortgage sector. Failing to explain how they define variable means that they fail to comply to this point also.
It is stated that Advertising must be compliant and the attached literature may well tick the statutory boxes. However, the loan and business it advertises differs vastly from the loan in practice. The “low cost” solution, the “people not property” claim, the lack of explanation regarding working of interest rates in practice are 3 but areas where the advertising falls foul of my experience of the loan in practice.
For me, the misleading nature of the true reality of the costs of borrowing and the agenda of the lender over the term of the agreement need to be covered in far more detail than simply quoting the APR and “total amount payable” based on the day one repayment.
Section 3.6 states: -
There should be transparency about the circumstances in which rates or charges may change, in particular where they may be varied at the discretion of the lender or by reference to some particular factor, for instance as a result of an increase in the lender's input costs. If rates are stated to be variable but do not vary in line with Bank of England base rate, this should be made clear, and if a particular rate is tracked, this rate should be stated.
This is simply not explained at all by the lender. They clearly did link their loans to base rate in an increasing market but now they found troubled times coupled with a falling market, simply resorted to lists of “excuses” as to why they would not reduce rates – property values falling, competitor pricing etc.
Section 4.4 states: -
If rates or charges are variable, this should be made clear. The potential implications of such variations should be explained, including the impact on the periodic instalments and / or the amount payable. Rates should only be increased on a loan to recover genuine increases in costs which have an effect on that loan and should not be misused, for example, to take advantage of a borrower's lack of ability to end the agreement. Clear explanations should be given to borrowers prior to rates or charges
changing.
Firstplus' underlying costs have decreased massively in the last 12 months. Since loan inception they have reduced by 80% (5% to 1%) based on FHBR (First Plus borrow at less than that but FHBR is the measure used in the T&C's so is used here.) My rate has increased by 20% (8.4% to 10%)
The business is clearly acting in breach of these guidelines and needs action as alluded to in your section covering Regulatory Compliance and Enforcement.0 -
The only thing is the Ombudsman has ruled against you so you have to sue or drop the matter.
Do you have the money to fund your legal team?0 -
well some of us are, we are opening the doors to representation on these issues and soon more will follow.0
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General Response to all except Jones. The Financial Ombudsman has said they will not even consider any of the UTCCR's or the Lending Code. Very strange comment / ruling but i have it in writing.
As it transpires i know that the OFT have to rule on them.
I wish some posters would take a hint and stop trying to cause arguments.0 -
jonesMUFCforever wrote: »The FOS is independent of the lender and its customers.
You have taken your grievance to them and they have found against you - so now you change stance to say what is the point of the FOS and how it is toothless - does sound to me like sour grapes!
I did say in my original post what you should have done is move the loan to another provider.
As you will know from the mortgage market, moving the loan is not as simple as that. It is not as easy as "shopping elsewhere" please allow some tolerance of that point and add something constructive to the argument which will involve your research and knowledge of Unfair Terms in Contract Clause Regs, your knowledge of the secured loan market and teh input teh regulatory bodies are able to impart.
Regarding sour grapes - the whole process involves understanding what regulators are there for and the key thing with this specific market is that it does not fall under the FSA like mortgages do, not under the FOS unless it is down to maladministration or similar...etc. The FOS have decreed that FP have acted within the remit of their ts and cs, that is fine and is the expected adjudication. The issue is one of fairness and the breach of UTCC and complaints have now been adressed to the OFT who deal with UTCCR in the Secured loan arena. This is something we have had to find out through our own experience.
Like you, I would not pass judgement on anyone else in any thread about something for which I had no real experience of or knowledge.0 -
I am thinking of taking out a secured loan, with concern about the variable rate aspect, and this thread came up on google. I also agree with some of the posters on this thread that unexplained increases should be illegal. Any variable rate APR should be tied to a market mechanism and increase or decrease accordingly. Any argument for not doing so has little moral weight. If society isn't base on morality, then what is it supposed to be based on? No business model should rely on fleecing existing customers and, let's face it, increasing costs is very seldom the reason for this practice anyway. Why this area hasn't been regulated I have no idea. For the record, and I speak from experience, I would have to describe the FOS as existing within a culture that is tantamout to being in bed with the banks etc..0
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Hi Plod, glad you saw this before taking out a secured loan. Firstplus are not the only company using these tactics to keep rates high. If you do take out a loan, ask the company for a definitive explanation in writing about their rate variations before you sign up, they refuse, you have reason to be concerned.0
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