Calculation of loan via Rule 78 - Help needed!

Maria47

Good evening all,

Hope there will be some brain storming out there in relation to my issue, all feedback will be appreciated and helpful.

I took out a loan with Blemain in 2004 - 12 year term - £18,000 loan
I settled this loan in 2008. Well in all honesty and to be real, this loan was calculated via Rule 78, which I had no idea of it's drastic consequences.

The settlement details are as follows:
Amount outstanding under the agreement £26,128.74
Less Rebate £8,422.40
Redemption Fee £395.00
Legal & Doc fee's £680.00
Collection costs £105.00

Now I have been reading about Rule 78 being a extremely unfair calculation, which makes the loan the original amount taken out. The Rule was abolished in 2005 but I'm wondering if there is still a case to claim back the unfair charges. It's as if the loan was not even paid at all. Loans settled after 2005 I assumed could not be calculated via rule 78?

Anyone have any views and opinion on this, I would like to hear. Many thanks

jonesMUFCforever

On what grounds do you have a claim?
Surely you understood the terms and conditions of the loan when you took it out?
Or am I missing something?

CLAPTON

why do you say it was unfair?

what would the early settlement figure be with the post 2005 rules?

what was the APR of the loan?

opinions4u

High rate long term loans tend not to see the balance fall much in the first few years.

Especially if you have a habit of missing payments.

chris-j

Rule of 78 simply loaded interest at front of loan and if a loan ran full term then made no difference. The rules changes were phased I think and if you had waited until 2010 the rules for Loans in excess of 10 years were brought into line(this was planned from the outset so was not something that was subsequently thought of). Difficult to tell what you would have paid had you waited without knowing interest rate or when paid off but basic calculation if you want to estimate -
Take total interest you would have paid if loan had run its full term
Divide interest by 10,440 - this is number of interest units you would pay
In first 4 years you would have paid 5,785 units of interest
In year 5 (2008-09) you would pay 1086 units of interest
In year 6 (2009-10) you would pay 942 units of interest
unlikely waiting till 2010 would have been financially beneficial to you.

In past people have successfully challenged rule of 78 but this tends to be when they are paying of the loan an questioning charges, as you paid if off in 2008, I doubt waiting 4 years would result in a successful claim as settlements seem to be goodwill rather than acknowledgement of unfairness.

toofy

Hi..I'm a bit confused with this as well - my situation is as follows ..

In March 2003 I took out a loan with Tesco for £15,000, over 120 months
apr 7.3%, repaying £175 per month, total amount payable = £21000.
In January 2005 I think I re-negotiated the loan (can't find the paperwork), adding on an extra £5000, now paying 6.9% over a further 120 mths (10yrs).
I settled this loan in full on 04/09/06, paying £18,074.55.
My question is this - can anyone work out if I settled under the Rule of 78 terms? Was I penalised by paying early, & should I have paid this amount?; is there anything I can do about this now, or is it too late? I'm hoping someone on the forum can number-crunch & advise. I read somewhere on the forum that the Rule of 78 was abolished in 2006, & I'm now wondering if I paid too much..many thanks for reading..

jonesMUFCforever

If it was abolished in 2006 then it would not have been backdated to loans already in existence.
So either way it would have made no difference to you.

antrobus

toofy wrote: »

...
I settled this loan in full on 04/09/06, paying £18,074.55.
...

Under the Limitation Act the six years was up on the 04/09/12, so any claim would likely be statute barred by now.

Maria47 wrote: »

... Loans settled after 2005 I assumed could not be calculated via rule 78?...

According to one report back in May 2005;

The reform will apply immediately for new borrowers. Existing ones who have loans for terms of 10 years or less, and want to settle early, will not benefit until 2007. Those with loans for longer than 10 years will not be covered until 2010.

http://www.independent.co.uk/money/loans-credit/punishment-eases-for-early-payers-of-debt-492393.html

antrobus

Of course, the simple answer to the question would be...

Maria47 wrote: »

....Now I have been reading about Rule 78 being a extremely unfair calculation, ..

It might well have been described as 'unfair' but it cannot have been unfair in law, because that was the method specified by the Consumer Credit (Early Settlement) Regulations 1983. i.e. lenders were legally required to use the Rule of 78 in calculating the settlement figure. That remained the case until the The Consumer Credit (Early Settlement) Regulations 2004 came into force, which specified an alternative actuarial formula.