Is this an unfair term in a consumer contract?

[welshperson3]

Hi

I’m looking for some impartial advice on some of the terms of my loan agreement,
And I would like to give you all a bit of background of why I am asking this question.

I have a high court case going on at the moment with a sub prime lender, which will have a significant impact on all lenders and borrowers, and I am having a difference of opinion with my solicitor over some of the terms of the agreement.

Now I have studied these terms and relevant law for over 2 years and I am finding it hard to believe that I am wrong, so I get impartial advice I wont put up any of my thoughts on this, but I would like some views on what to do and what legal argument to use if any.


The following are actual terms taken from my agreement, it is a variable interest rate and it is a consumer credit act regulated agreement.


1 “the lender may vary the rate of interest per month from time to time to take account of actual or expected changes in market conditions”

2 “rate means the higher of %5 above the base rate for the time being of the bank of Scotland or the highest rate payable under any credit agreement and the highest rate payable under the relevant agreement”



If you read number two correctly it says that the interest rate will go up if the bank of Scotland raise their interest rate, but if the interest rates fall then the interest on this agreement will never go down.


All opinions especially negative ones (to show were im going wrong) would be much appreciated.

wp3

[Never-In-Doubt]

Re: Is this an unfair term in a consumer contract?

I've emailed Paul - see what he says....

Bear with us.

[welshperson3]

Re: Is this an unfair term in a consumer contract?

I've emailed Paul - see what he says....

Bear with us.

Thanks,

I think Paul may well already know about this term.
And it would be nice if he could explain what he thinks of it .

[Never-In-Doubt]

Re: Is this an unfair term in a consumer contract?

Have you spoke with him regards it?

[welshperson3]

Re: Is this an unfair term in a consumer contract?

No not him personally

[Never-In-Doubt]

Re: Is this an unfair term in a consumer contract?

No not him personally

Andrew, Gwyn...? Just curious if you've touched base with them before

[welshperson3]

Re: Is this an unfair term in a consumer contract?

I don’t really want to go in to who the solicitor is as the last thing I want to do is upset them, but I think I am right in my belief about the terms of my agreement, and im just trying to find out what others think about these terms,

Other peoples opinion will either strengthen my belief or show me were im going wrong. And then I make the decision whether to proceed on this point or to drop it.

[PlanB]

Re: Is this an unfair term in a consumer contract?

"This week the Cheshire Mortgage Corporation (part of the Blemain Group) had to change the wording in it's mortgage contracts after the FSA deemed it's original wording unfair". Does this help in any way I'm quoting from that well known journal called Mortgage Strategy.

The FSA felt "the wording gave the lender unrestricted power to vary interest rates without specifying valid reasons for doing so". I've no idea whether your contract would be a parallel scenario but it may be worth exploring the logic and reasoning behind the FSA decision. I posted this on Transformer999's thread in the protected section so there can't be a link to it here, but I'll ask her to PM it to you.

HTH

[welshperson3]

Re: Is this an unfair term in a consumer contract?

Thanks planB

I already have a copy of the undertaking given to the FSA, but thanks for taking an interest in my predicament

[PlanB]

Re: Is this an unfair term in a consumer contract?

Thanks planB

I already have a copy of the undertaking given to the FSA, but thanks for taking an interest in my predicament

Then maybe you could PM the FSA undertaking to me because I've raised a complaint with Kensington Mortgages (2nd charge) on this very point which is why I've been researching the background. Last year the FSA upheld my complaint against Mortgage Express about a specific mortgage term so I'm becoming mega interested in the subject I presume you've also read the Skipton Building Society unfair term fiasco too?

[welshperson3]

Re: Is this an unfair term in a consumer contract?

Hi planB
If you go to the link you can download the undertaking

http://www.fsa.gov.uk/static/pubs/other/cmc-undertaking.pdf

[Paul.]

Re: Is this an unfair term in a consumer contract?

Hi

I’m looking for some impartial advice on some of the terms of my loan agreement,
And I would like to give you all a bit of background of why I am asking this question.

I have a high court case going on at the moment with a sub prime lender, which will have a significant impact on all lenders and borrowers, and I am having a difference of opinion with my solicitor over some of the terms of the agreement.

Now I have studied these terms and relevant law for over 2 years and I am finding it hard to believe that I am wrong, so I get impartial advice I wont put up any of my thoughts on this, but I would like some views on what to do and what legal argument to use if any.


The following are actual terms taken from my agreement, it is a variable interest rate and it is a consumer credit act regulated agreement.


1 “the lender may vary the rate of interest per month from time to time to take account of actual or expected changes in market conditions”

2 “rate means the higher of %5 above the base rate for the time being of the bank of Scotland or the highest rate payable under any credit agreement and the highest rate payable under the relevant agreement”



If you read number two correctly it says that the interest rate will go up if the bank of Scotland raise their interest rate, but if the interest rates fall then the interest on this agreement will never go down. Below


All opinions especially negative ones (to show were im going wrong) would be much appreciated.

wp3

Ok,

My take on this is that firstly if the term is unfair, under UTCCR 1999 the term must be struck from the agreement if the agreement can continue without that term, otherwise the contract falls over and thats that.

In this present case, even if the term is unfair, what benefit would a party gain from striking it from the contract?

It would be of little benefit as the Court does not insert a new term that the party wants, it merely strikes out the term as unfair.

In the present case, the problem is in my view that the the rate of interest has not gone up or down, it is the rate as it was agreed between the parties when the loan was entered into, it was and remains the rate that was agreed.

Now in Harrison v Link, one of the arguments run was that the ramping up of the interest rate was unfair. Judge Chambers said

Whether or not the Claimant knew it, the fact is that organisations that provide credit to consumers have themselves to use credit for which they must pay. The cost of credit moves up and down. Creditors such as MBNA make their money on the margin obtainable between the cost of their borrowing and the income from their lending. I have no idea whether MBNA were or were not greedy in the amount that they charged debtors as against what they had to pay their creditors. What I do know is that when interest rates rise it will become increasingly hard for debtors to service their borrowings.

What you are arguing,as i understand it, is because the rate never came down when the interest rates lowered then that is materially unfair notwithstanding the fact that the rate is the same as it was when you signed the agreement

I do not see what prejudice you suffer by this, the clause itself does not say they will lower the rate

2 “rate means the higher of %5 above the base rate for the time being of the bank of Scotland or the highest rate payable under any credit agreement and the highest rate payable under the relevant agreement”

The above term does not give an obligation to the creditor to lower the rate at all, nor has it lowered or raised it.It remains what you agreed with the lender, this is the difficulty here

It would have far more to bite on in my view if the creditor had raised the rate when the rates went up and failed to lower it when the rates came down, then i could see an argument succeeding, however, as it stands i cannot see any utility in the argument as you have signed a loan at x rate, and the loan remains at x rate.

The courts have repeatedly said under the old extortionate credit bargain provisions, that rates such as 75 to 80% are not unfair, and Chambers QC would be well aware of those authorities, and the likelihood in my view, is that he would take the same view that you suffer no prejudice, that the rate is not entirely disproportionate or extortionate, and in any event, even if the clause were struck from the agreement, it would serve little benefit or comfort to you thus, even if you did win on that point it wouldnt take you anywhere so on the issue of costs, since it would be of no utility, then the Court may well take the view which it did in HSBC v Brookes (Court of Appeal) and order costs neutral or costs against you even, thus you could end with liability for the work done which achieves you no benefit in real terms

does that assist?

[PlanB]

Re: Is this an unfair term in a consumer contract?

Thank you Paul, that explanation very much assists.

What you are saying is that even if a contract term is potentially unfair, it makes no odds unless you have actually suffered as a consequence. At that point (if it ever happens) you can argue what 'happened' (such as an interest rate payment rise) was based on an unfair term. Complicated but also commonsense.

I may still take a closer look at my Kensington Mortgage clause because that keeps on rising and rising since it's linked to Libor

[welshperson3]

Re: Is this an unfair term in a consumer contract?

Hi paul

Just a quick question

What is plain intelligible language of a variable interest rate ?

Definition of 'Variable Interest Rate'

An interest rate on a loan or security that fluctuates over time, because it is based on an underlying benchmark interest rate or index that changes periodically. The obvious advantage of a variable interest rate is that if the underlying interest rate or index declines, the borrower's interest payments also fall. Conversely, if the underlying index rises, interest payments increase


the 'contra proferentem' rule is that where there is any ambiguity in regards to a clause it is to be interpreted against the party seeking to rely on it. Regulation 7 states this very clearly:[2] "(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.[/FONT][/COLOR]

[Paul.]

Re: Is this an unfair term in a consumer contract?

Thank you Paul, that explanation very much assists.

What you are saying is that even if a contract term is potentially unfair, it makes no odds unless you have actually suffered as a consequence. At that point (if it ever happens) you can argue what 'happened' (such as an interest rate payment rise) was based on an unfair term. Complicated but also commonsense.

I may still take a closer look at my Kensington Mortgage clause because that keeps on rising and rising since it's linked to Libor

Pretty much, i think it really needs some sort of prejudice to you, to get the Courts interested as things stand. Lenders like belmain need to charge more than the base rates as they play the bonds markets, simply because they arent banks and dont have the ability to create money in the way the banks do. So they need to buy low sell high

I think the problem here is that the loan has the same rate of interest now as it had when it was signed, that is the bargain that was struck between creditor and debtor. I dont think Chambers would allow any suggestion that even though that is what was agreed, and the rate has not changed, that there is some kind of prejudice. It seems also to provide little or no remedy, even if unfair i simply cannot see what is gained by removing this clause, as it has nothing to bite on