Whilst Former makes some valid points there are other things to consider.
I have spoken with the FSA and it is possible that a lender can "mis sell" a loan and thus have it declared unenforceable. Without taking this thread down too much of a different route, there is always an element of the "man doth protest too much" within Former's comments. This is part of my current dialogue with the FSA:
Your letter has indicated that you may have been led to expect that the
interest rates applied to your FirstPlus loan would be directly linked to
Bank of England rates or similar rates. If this is the case, you may have
grounds for a complaint over the sale of your loan.I have been looking through various items of literature and this is pretty clear from FirstPlus,Rate Increase - frequently Asked Questions
Why has my rate increased?
The interest rate on your loan is variable. This means that your rate could go up or down.
The way in which our interest rates are calculated is based on the Finance House base Rate (FHBR). Please refer to the terms and conditions on your credit agreement or visit www.fla.org.uk for more information. However any changes to the Bank of England interest rates or FHBR could affect the rate we charge our customers.They state also in another point relating to customer information:I wasn't aware my rate was linked to the FHBR. What's this?
The way in which our interest rates are calculated is based on the FHBR. Please refer to the terms and conditions on your credit agreement or visit www.fla.org for more information.Below is typical wording from rate change letters:"The most recent Bank of England decision forces FirstPlus to increase APRs for all accounts from ..."To use an understood market term such as "variable" and to follow interest rate rises from the Bank of England in such a way means that you are lead to believe in a rising market that nothing is untoward. It is not until you are in a decreasing part of the rate cycle that suddenly a different interpretation is seen to apply.They insist now their loan is not linked to base rate but their rates are influenced by:- competitor pricing ( vastly changed market place for new loans and FP are not offering new loans, one that they insist their clause allows them but by knowing this they make no effort to explain at point of sale and as such I now formally hold my loan with First Plus as being missold. Had this been explained at point of sale this loan would not exist.
- house prices are falling - in the last few months some may be falling slightly but over the previous years they have done nothing but increase. As a business that advertised its loans at 125% loan to value then again this is nothing more than a convenient excuse not a formal reason. One where only the negative that suits the lender is applying. When prices were rising and equity was increasing, no rate reductions were being offered due to their "improved security" position. Added to this over time is the fact that most 1st mortgages will have reduced in terms of capital outstanding, so house pricing alone is a complete misnoma. House prices are now going back up, back to the drawing board for that plan of avoidance within FP.
- they formally advised me that they are unable to explain my rate rises as "these amendments were made as a result of our commercial judgement" - this brings their definition into line with a recent FSA ruling on an investment product where Barclays could change rates "for any good reason"
Where you were taken into a "non reg" arena would be frowned upon if there is no valid reason to substantiate.
There are no loans that are interest front loaded. My personal loan with NW isn't. It is interest applied on the reducing balance, as are a number of unsecured loans. Granted most secured loans were put into this "front loaded" arena but when they are variable rate, this does contradict a lot of traditional loan workings, as fixed rate monthly payment loans have a specific amount payable and the apportionment of interest to capital is clear, even using rule of 78. With the mechanism employed by FP, this is far from clear.
When I took out my loan, I said that I wanted to try and pay it off quickly and was advised, "don't try and settle it within 5 yrs". I talked about lump sum and was not given the 10% chat. I understand that ts and cs are provided and they should be read through. Having worked for a bank I also have to state there is onus on the seller to explain and ensure understanding before signing. The variable rate term and its application is a complete and utter nonsense and I know Former has said "FP are clear it does not breach unfair contract terms"except this reads differently:
As you state in your response, the ability of a rate of interest to be charged is unlikely to be considered a term under Regulations, however, the actual rate is not the issue. It is the ability of the lender to change ( or not change) this rate to suits its own purposes and to refuse to state how it calculates its rates that makes the bargain one sided in favour of the
> lender. With regards to the Unfair Contract Terms guidance you pointed me to, the first point that jumps out, underlines all of the above completely,
"A standard term is 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'- Regulation 5(1). Unfair terms are not enforceable against the consumer. The requirement of 'good' faith embodies a general 'principle of fair and open dealing'.
1 It means that terms should be expressed fully, clearly and legibly and that terms that might disadvantage the consumer should be given appropriate prominence - see below. 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 also states,
"10.4 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."
First Plus will provide no transparency other than quote their clause terms. Had they explained at point of sale the application of their term in practise I would not have agreed to the loan. To simply say "the loan is variable" and then to move it initially in line with Bank of England movements meant I developed an understanding that was expected however it differs greatly from what is now the truth. I would challenge the legality of the sale on this basis as I feel mislead.
They have refused to disclose this to the FLA and they have told me that unless I can prove maladministration of the loan then the FOS will not be interested in a complaint regarding this matter also.
I really have no trust in anything that comes out of First Plus as they are doing nothing more than firefighting and covering their own backsides. The fact they have taken advice on Unfair Contract Terms means they have a fear and nothing they can do can make the above read any differently. They have had to have Barcalys put another £9m of share cap in January, I wonder why? I await the publication of their next accounts with interest, have dialogue ready for the Chief Executive and will not rest with them until they have my house or they have compensated me and many others for their application of terms and abuse of our goodwill.