Rule of 78 & First Plus

veridian

My first post... (Though I think I added in in the wrong section initially .D'oh!)

Hi folks – I’ll give as much info as I can! – Yes its good old First Plus or UK Lending as I see they call themselves now – (like Guantanamo Bay re-branding itself as Cuban Secluded Sunshine Resorts!)
Anyway, I took out a FP loan for £60,000 in Dec 2003. They tried to sell me PPI, but I was astute enough at the time to realise that 14.6k insurance (plus int!) on a 60k loan was a total stitch up so I didn’t take it up. Just a shame I didnt ditch the whole thing.. hindsight yadda yadda yadda.

In June 07, I obtained a settlement figure of £62,091 but didn’t take it up, however we are now moving house and want to be rid of this loan. A settlement figure for Nov 09 is now £60,064. I rang them to ask how on earth this could be and was fobbed off with its a difficult arithmetic equation known as the Rule of 78. Having now done some research I see this has now been outlawed for all loans from 31/5/2010. However there seems to be a grey area as to whether because my loan is above 25k that this should be used at all!.

Indeed my original agreement says ‘You may settle this Agreement in full at any time in accordance with the Consumer Credit Act 1974, notwithstanding that this Agreement is not regulated by the Act.’

It then goes on to say I can settle in line with the ‘Consumer Credit (Rebate in Early Settlement) Regulations 1983 to which I am entitled’.

Interestingly I note my June 07 settlement letter actually includes a paragraph saying that The rebate as been calculated iaw the CC(RES) Regulations 1983, yet the one I received this week now only says the figure as been calculated iaw the terms and conditions in my loan agreement. It makes no mention of the particular acts. It’s disgusting that FP continue to operate in this manner despite this Rule of 78 calculation being in its death throws.

My question is:- Can I challenge the calculation method used on the basis that either a) My loan was never covered by the CCA 1974?
or perhaps b) that the Rule of 78 has been abolished and they should do the decent thing and recalculate it - Happy to hear any other suggestions you may have.

Further Info – Ive never been late with any payment. Im paying 10.8% - DAYLIGHT ROBBERY!. My current balance is apparently around 55,300 – yet their ‘total amount payable under agreement’ is approx 79,300 minus a 19,300 ‘rebate’ – meaning I still owe more than the original value of the loan some 6 years after taking it out Grrrrrr.:mad:
Thanks in advance!

CLAPTON

what period was the loan over
what was the monthly payment
was it a fixed rate

veridian

Hi clapton, it was over 300 months, it wasnt fixed rate - I started out at 7.9%, and I'm forking out £547 a month at the moment.

CLAPTON

with a varibale rate it's pretty difficult to calculate anything
but if you are only 6 years into a 25 year loan then you won't expect to have paid a lot of the capital back

as an example .. and I realise it's not exactly your situation but if you borrowed 60k over 300 months at 10.8% APR then after 72 months (6 years ) the balance of your account would still be over 55k (as per CCA rules from 2005 onwards)

veridian

Hi Clapton,
I'm aware of that and haven't got a problem it, as when you ask FPwhat your balance is they give you the figure, - but that is way different from their settlement figures!!!

Indeed by law you are now supposed to get an annual statement detailing monthly interest payments versus your payments, so whilst I know my outstanding balance is around £55,300 or thereabouts, it's this 'rule of 78' that's adding the extra £5,000 onto the settlement figure.:mad:
Use of this rule is being outlawed but the detail of whether it still applies to loans over 25k, which may or may not be subject to the CCA is what Im trying to find out!! -As FPs T&Cs are vague and if anything a bit contradictory.... given their recent track record, its not surprising!

shafted_fpc

My understanding is that the rule of 78 can be challenged even for someone in your position.
am not fully conversant with the argument however some peeps have had success with it in different county courts, although I don't know of a higher court ruling on it.
You may also want to address the sods on the interest rate clause if you wanted to fight them on this.

could google firstplus complaints there are some real experts on this over there