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Re: Barclays FirstPlus Super Complaint
ed here is some of my personal complaint, I get a bit confogged sometimes but it has the details of my thoughts and opinion on the clause.
I am writing to complain about my standard loan contract from BFP.
My concerns are:-
1)that the way the interest rate term has been applied in itself constitutes an unfair credit relationship under section 140 of the CCA.
2)That the interest rate clause is an unfair contract term under the UTCCR 1999
3)That the interpretation and application of this clause by BFP constitutes an Unfair Credit Relationship is actionable as an unfair term via Unfair Credit relationship provisions.
This initial complaint is with about the first point and then a bit on section seven of the UTCCR I have a number of concerns re the UTCCR and will supply another complaint in the New year on these matters
With the third element of the complaint I am in some confusion as to which course of action is applicable and would ask should this be addressed through you or the courts/FOS?
As can be seen from the loan agreement the front page clearly states the interest rate as variable and it has some prominence the interest rate clause itself is written in the small print it reads:-
“we may from time to time vary our interest rate. we may increase or reduce our rate to reflect a change which has occurred, or which we reasonably expect to occur in interest rates generally or to ensure that our business is carried on prudently, efficiently and competitively. The interest rate on your account will not in any twelve month period, vary by more than twice the variation in the FHBR published by the FLA during the same period.”
on reading the term variable and on reading the clause and in conversation at point of sale my understanding was that when interest rates generally went up so would the loans when they went down that the rate applicable to the loan would. I believe that anyone reading the term would assume this to be the case, However it now transpires that that is not the case as interest rates have fallen significantly and despite rising with them the rate applicable to the loan has not fallen.
Having enquired of BFP as to why I have got no satisfactory answer. I have re read the clause many times and believe that it is interpreted in a wholly unfair manner that I feel I must bring to your attention so that you can act upon it.
Now the above term it transpires can have many different interpretations and can therefore be applied in many ways. The way in which it is applied to my loan appears to be this. Other interpretations I will return to later.
That when the Bank of England increases interest rates, Firstplus can foresee that the FHBR will similarly increase so they increase their interest rate in line with the term, however when the bank of England reduces interest rates they don't reduce rates, neither do they reduce rates when the FHBR drops. This on close examination of the clause after empirical evidence of no rate decreases is in keeping with the clause. AS such the clause effectively acts as a ratchet. This in my mind is a clever trick contrary to good faith, in fact as a write I have the image of a rather amusing trick I once saw on telly with a magician throwing ever increasing balls of paper over his shoulder and a man in front not being able to see it, the term for this type of trick is misdirection and we as customers were misdirected as to the meaning of the term.
In relation to my first concern that of this in itself constituting an Unfair Credit Relationship, these loans were sold as low cost, they were not sold as low cost for a while then high cost which is what they are becoming and will become more so due to BFP's application of the interest rate clause.
From your own website:-
Section 140A of the 1974 Act (as amended) provides that a court may determine that the relationship between a lender and a borrower arising out of a credit agreement (or the agreement taken with any related agreement) is unfair to the borrower because of:
any of the terms of the credit agreement or a related agreement
the way in which the lender has exercised or enforced its rights under the credit agreement or a related agreement, or
any other thing done (or not done) by or on behalf of the lender either before or after the making of the credit agreement or a related agreement.
It also states that you powers to act.
Now the above quote is an accurate reflection of section 140 and the powers within section 140 are wide ranging, this I take to be to enable a proportionate response to Unfairness.
Also I would note that section 140 refers to “any of the terms of the credit agreement” that would be inclusive of all terms weather “core term” or not.
I hold that the relationship is Unfair, in a common day understanding and more importantly in a legal understanding of the word unfair, that therefore it should be actioned as an”Unfair credit relationship” irrespective of any consideration as an “unfair Term”.
The leading judgement on what is meant by fair I now understand to be:-
Director General of Fair Trading v First National Bank plc [2001]
Lord Bingham
17 A term falling within the scope of the regulations is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith. The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. The illustrative terms set out in Schedule 3 to the regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties' rights and obligations under the contract. This involves looking at the contract as a whole. But the imbalance must be to the detriment of the consumer; a significant imbalance to the detriment of the supplier, assumed to be the stronger party, is not a mischief which the regulations seek to address. The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 of the regulations. Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice. Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the regulations are designed to promote.
This although dealing with terms clearly shows what is meant by the word unfair, in relation to the way BFP customers have been treated the test would be if the way that BFP have acted has caused a “significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith.”
By applying the interest rate clause in the way described above as a ratchet device; Firstplus are acting and have acted in bad faith that is they have and are implementing a pitfall or hidden trap as described in the above definition of unfair, they are tilting their supposed rights significantly in there favour. Now it is not until they have sprung the trap that people have become aware of it because it is cunningly disguised, but increasingly it is having an effect.
It no doubt will be said that the term was there for all to see and some reference is made to it on the front page however this is irrelevant as the trap is hidden in the wording, it is a trick put there to give the impression that there is some correlation to interest rates in general and the FHBR in particular they did not write “should the Bank of England raise rates we will, should the Bank of England drop rates we will not unless we want to” but that is exactly how the clause works it is a trap or trick.
Further the requirement of fair dealing is addressed above, these loans were into the non status market as defined by the non status lending guidelines produced by yourselves and I would draw your attention to the wording on fair dealing above “ Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 of the regulations” This has to be read along side the assumed naive nature of the consumer as set out in your own guidelines.
To expand on this last sentence I am referring to the “non Status lending guidelines 1997” these were issued by the OFT with regard to increasing concern about the way this section of the market worked and from the out set lenders were made aware of the concerns within the OFT about this sector primerelly a lot of these concerns were about the adequacy of the “extortionate credit bargain” provisions about unfair terms and about the need to replace the “extortionate credit bargain” with something that offered more protection this was done with the “unfair credit relationship” provision.
Also within this guidelines from the outset is acknowledged in para 2 :- “They may be less knowledgeable or experienced in financial matters than the generality of consumers, and on the whole they are more vulnerable. ” A call for clarity is made and reference is made to the previous unfair terms act in place at the time. As such Firstplus would or should have been aware of the nature of the consumer they were dealing with, would or should have been aware of the importance that the OFT put on clarity in these contracts,indeed in issuing these guidelines the OFT was doing its job.
Given the concern that the OFT had to the knowledge and experience of the customers I put it to you that this term has to be read as if by one of those customers not because the judgement lord requires it “ take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract” but also because the OFT guidelines require it.
Further more the requirement of “good faith” cannot under the circumstances be seen to be met indeed the fact the the term was worded in the way it was shows an intent to “bad faith” . In every aspect this clause fails the composite test described above as such they have demonstrably failed to adhered to the “good standards of commercial morality and practice” refereed to above.
With specific regard to interest rates the guide states
The contract documentation should indicate clearly the APR, the amount of the initial
repayment, and the number and frequency of subsequent payments. Inclusion of an
annual flat rate of interest should be avoided, as this may be misleading to borrowers.
If an interest rate other than the APR is shown, this should be of no greater
prominence than the APR. If interest rates can be varied unilaterally by the lender,
this should be made clear, and the manner in which and the basis upon which rates
may vary should be explained. It would be helpful to borrowers to illustrate, by way
of example, in the contract documentation or an accompanying leaflet, how the
monthly payment would be affected by a change in interest rate of one percentage
point. The contract documentation should explain clearly when and how payments
will be due, and the consequences of failure to make payment on time.
Now this was in relation to earlier legislation however the element re clarity remains and even when the guidelines were set out the notion of clarity was important and stressed to the lender as such Firstplus could and should have explained the way in which interest rates are varied in a precise and clear manner not in the ambiguous manner they did, this should have been relativity simple for them to do as they appear to be using a mathematical model of some kind ( a point I will return to). The call for explanation goes beyond merely pointing to a clause (that is misleading) in the small print. Also I would suggest to you that it should also be of concern to you that the loans where sent out with red crosses printed where the borrowers had to sign and with a covering letter that the effect (if not design) of this was to encourage the borrower merely to sign and return without proper scrutiny.
Not withstanding this obligation incumbent upon Firstplus I put it to you that even the most sophisticated of customers if presented with the loan as it was presented to me amongst the sales pitch documentation and within the context of Firstplus's advertisement would fall for the trick
It may also be useful to look at your own “Second charge lending– OFT guidance for lenders
and brokers 2009” on these points as the 1997 guidelines pre-date both the legislation and judgement as to fair and the guidelines are reflective of your present expectations and indeed present legislation. As such Firstplus would or should have been aware of their obligations here
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.
Returning to the clause itself:-
“we may from time to time vary our interest rate. we may increase or reduce our rate to reflect a change which has occurred, or which we reasonably expect to occur in interest rates generally or to ensure that our business is carried on prudently, efficiently and competitively. The interest rate on your account will not in any twelve month period, vary by more than twice the variation in the FHBR published by the FLA during the same period.”
this can have many interpretations and applications to date the application has been
1 if interest rates go up we will match that rise, if they fall we will not.
There are others
2 if interest rates rise we will increase ours by twice as much if they fall we wont reduce ours
both these alternatives favour the lender
or a logically fair interpretation
3 if (Bof E FHBR) interest rates rise we will increase ours if they( Bof E FHBR) fall we will reduce our rates
4 if interest rates go down we will match that fall, if they rise we will not.
5 if interest rates fall we will decrease ours by twice as much, if they rise we wont raise ours
and these last two favour the borrower
Ok this analyses is somewhat shallow but it is the basic position as I see it, below is a more detailed analyses and following that some view as to action that can be taken.
Going through the clause
“we may from time to time vary our interest rate” simply states the rate is variable at any time. They then go on to say “we may increase or reduce our rate to reflect a change which has occurred, or which we reasonably expect to occur in interest rates generally” this phrase allows for the interest rates to be varied in accordance with expectations they have ie that interest rates generally may go up if Bof E goes up , explicit in the use of the word Expect is that there is some deliberation over a rise or fall in their rates yet to ensure that our business is carried on prudently, efficiently and competitively.”However the way in which interest rates have moved indicates adherence to a precise mathematical or logical model, I see very little wrong with that in itself if that logical method is transparently stated. As applied I would suggest that wording the clause “We will raise our interest rates to reflect any upward change, or expected upward change in the FHBR, we will keep our rates unchanged if there is a downward change in the FHBR.” Would be an accurate reflection of this mathematical model.
Now the reference to the FHBR needs examination of what the FHBR is, this is defined on there website as “The rate is calculated at the end of each month by averaging the cost of three-month money in the interbank market over the previous eight weeks. The resulting figure is then rounded up to the next half point. The process is entirely arithmetical and contains no discretionary element.” A perfectly clear explanation of what is a reactive rate that in fact lags the libor rate by a number of months has an element that rounds up to the nearest half point and should in itself be adequate cushion for Firstplus especially as they stipulate that they can anticipate movements.
identifies criteria that may be used the
The interest rate on your account will not in any twelve month period, vary by more than twice the variation in the FHBR published by the FLA during the same period.
Now this demonstrates a clear ambiguity about the clause. If pursued under the “unfair Credit Relationship provisions” there could therefore be a number of remedies to the situation one may be to seek the most logical interpretation another may be to ignore the complaint, another may be to contrive to justify Firstplus's actions and another would be to seek the most favourable interpretation for the consumer in line with the common law principle of contra proferentum. I realise that should the action you take be to seek an injunction on the use of the current clause that you may not be able to apply this notion however the courts wide ranging powers could be used to ask for an order applying the most logical interpretation to the clause and asking for this to be applied to the loans either from the date of the agreement or from the date on which the provisions of the section 140 became applicable to the loan.
At this point I feel that I must highlight that on this issue I have concerns regarding the use of the rule of 78, the nature of changes to Firstplus's trading position, and the way in which the clause acts in relation to liabilities firstplus have as a result of mis selling PPI for brevity's sake I will address these issues in the UTCCR complaint to follow
Alternative to this action could be taken under regulation 7 of the UTCCR which specifically adresses ambiguity and status a position which is no more than a statutory codification of contra proferentum, however the OFT is limited in its application of this by regulation if it where to act by section 12. This I find to be somewhat perverse in that it may be the case that should the OFT act on the clause directly the consumer may be left in a position no better than if the OFT didn't act and that the consumer may have be in a worse position as action through the courts or FOS may be more difficult. Also it would seem perverse in this that: if a lender acted in accordance with the regulations and didn't cause detriment to customers, then they would have effectively lost out to the detriment causing lender, the detriment causing lender having merely to adopt a new non detriment clause, and keep all the current and future rewards for there wrongdoing.
ed here is some of my personal complaint, I get a bit confogged sometimes but it has the details of my thoughts and opinion on the clause.
I am writing to complain about my standard loan contract from BFP.
My concerns are:-
1)that the way the interest rate term has been applied in itself constitutes an unfair credit relationship under section 140 of the CCA.
2)That the interest rate clause is an unfair contract term under the UTCCR 1999
3)That the interpretation and application of this clause by BFP constitutes an Unfair Credit Relationship is actionable as an unfair term via Unfair Credit relationship provisions.
This initial complaint is with about the first point and then a bit on section seven of the UTCCR I have a number of concerns re the UTCCR and will supply another complaint in the New year on these matters
With the third element of the complaint I am in some confusion as to which course of action is applicable and would ask should this be addressed through you or the courts/FOS?
As can be seen from the loan agreement the front page clearly states the interest rate as variable and it has some prominence the interest rate clause itself is written in the small print it reads:-
“we may from time to time vary our interest rate. we may increase or reduce our rate to reflect a change which has occurred, or which we reasonably expect to occur in interest rates generally or to ensure that our business is carried on prudently, efficiently and competitively. The interest rate on your account will not in any twelve month period, vary by more than twice the variation in the FHBR published by the FLA during the same period.”
on reading the term variable and on reading the clause and in conversation at point of sale my understanding was that when interest rates generally went up so would the loans when they went down that the rate applicable to the loan would. I believe that anyone reading the term would assume this to be the case, However it now transpires that that is not the case as interest rates have fallen significantly and despite rising with them the rate applicable to the loan has not fallen.
Having enquired of BFP as to why I have got no satisfactory answer. I have re read the clause many times and believe that it is interpreted in a wholly unfair manner that I feel I must bring to your attention so that you can act upon it.
Now the above term it transpires can have many different interpretations and can therefore be applied in many ways. The way in which it is applied to my loan appears to be this. Other interpretations I will return to later.
That when the Bank of England increases interest rates, Firstplus can foresee that the FHBR will similarly increase so they increase their interest rate in line with the term, however when the bank of England reduces interest rates they don't reduce rates, neither do they reduce rates when the FHBR drops. This on close examination of the clause after empirical evidence of no rate decreases is in keeping with the clause. AS such the clause effectively acts as a ratchet. This in my mind is a clever trick contrary to good faith, in fact as a write I have the image of a rather amusing trick I once saw on telly with a magician throwing ever increasing balls of paper over his shoulder and a man in front not being able to see it, the term for this type of trick is misdirection and we as customers were misdirected as to the meaning of the term.
In relation to my first concern that of this in itself constituting an Unfair Credit Relationship, these loans were sold as low cost, they were not sold as low cost for a while then high cost which is what they are becoming and will become more so due to BFP's application of the interest rate clause.
From your own website:-
Section 140A of the 1974 Act (as amended) provides that a court may determine that the relationship between a lender and a borrower arising out of a credit agreement (or the agreement taken with any related agreement) is unfair to the borrower because of:
any of the terms of the credit agreement or a related agreement
the way in which the lender has exercised or enforced its rights under the credit agreement or a related agreement, or
any other thing done (or not done) by or on behalf of the lender either before or after the making of the credit agreement or a related agreement.
It also states that you powers to act.
Now the above quote is an accurate reflection of section 140 and the powers within section 140 are wide ranging, this I take to be to enable a proportionate response to Unfairness.
Also I would note that section 140 refers to “any of the terms of the credit agreement” that would be inclusive of all terms weather “core term” or not.
I hold that the relationship is Unfair, in a common day understanding and more importantly in a legal understanding of the word unfair, that therefore it should be actioned as an”Unfair credit relationship” irrespective of any consideration as an “unfair Term”.
The leading judgement on what is meant by fair I now understand to be:-
Director General of Fair Trading v First National Bank plc [2001]
Lord Bingham
17 A term falling within the scope of the regulations is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith. The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. The illustrative terms set out in Schedule 3 to the regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties' rights and obligations under the contract. This involves looking at the contract as a whole. But the imbalance must be to the detriment of the consumer; a significant imbalance to the detriment of the supplier, assumed to be the stronger party, is not a mischief which the regulations seek to address. The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 of the regulations. Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice. Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the regulations are designed to promote.
This although dealing with terms clearly shows what is meant by the word unfair, in relation to the way BFP customers have been treated the test would be if the way that BFP have acted has caused a “significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith.”
By applying the interest rate clause in the way described above as a ratchet device; Firstplus are acting and have acted in bad faith that is they have and are implementing a pitfall or hidden trap as described in the above definition of unfair, they are tilting their supposed rights significantly in there favour. Now it is not until they have sprung the trap that people have become aware of it because it is cunningly disguised, but increasingly it is having an effect.
It no doubt will be said that the term was there for all to see and some reference is made to it on the front page however this is irrelevant as the trap is hidden in the wording, it is a trick put there to give the impression that there is some correlation to interest rates in general and the FHBR in particular they did not write “should the Bank of England raise rates we will, should the Bank of England drop rates we will not unless we want to” but that is exactly how the clause works it is a trap or trick.
Further the requirement of fair dealing is addressed above, these loans were into the non status market as defined by the non status lending guidelines produced by yourselves and I would draw your attention to the wording on fair dealing above “ Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 of the regulations” This has to be read along side the assumed naive nature of the consumer as set out in your own guidelines.
To expand on this last sentence I am referring to the “non Status lending guidelines 1997” these were issued by the OFT with regard to increasing concern about the way this section of the market worked and from the out set lenders were made aware of the concerns within the OFT about this sector primerelly a lot of these concerns were about the adequacy of the “extortionate credit bargain” provisions about unfair terms and about the need to replace the “extortionate credit bargain” with something that offered more protection this was done with the “unfair credit relationship” provision.
Also within this guidelines from the outset is acknowledged in para 2 :- “They may be less knowledgeable or experienced in financial matters than the generality of consumers, and on the whole they are more vulnerable. ” A call for clarity is made and reference is made to the previous unfair terms act in place at the time. As such Firstplus would or should have been aware of the nature of the consumer they were dealing with, would or should have been aware of the importance that the OFT put on clarity in these contracts,indeed in issuing these guidelines the OFT was doing its job.
Given the concern that the OFT had to the knowledge and experience of the customers I put it to you that this term has to be read as if by one of those customers not because the judgement lord requires it “ take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract” but also because the OFT guidelines require it.
Further more the requirement of “good faith” cannot under the circumstances be seen to be met indeed the fact the the term was worded in the way it was shows an intent to “bad faith” . In every aspect this clause fails the composite test described above as such they have demonstrably failed to adhered to the “good standards of commercial morality and practice” refereed to above.
With specific regard to interest rates the guide states
The contract documentation should indicate clearly the APR, the amount of the initial
repayment, and the number and frequency of subsequent payments. Inclusion of an
annual flat rate of interest should be avoided, as this may be misleading to borrowers.
If an interest rate other than the APR is shown, this should be of no greater
prominence than the APR. If interest rates can be varied unilaterally by the lender,
this should be made clear, and the manner in which and the basis upon which rates
may vary should be explained. It would be helpful to borrowers to illustrate, by way
of example, in the contract documentation or an accompanying leaflet, how the
monthly payment would be affected by a change in interest rate of one percentage
point. The contract documentation should explain clearly when and how payments
will be due, and the consequences of failure to make payment on time.
Now this was in relation to earlier legislation however the element re clarity remains and even when the guidelines were set out the notion of clarity was important and stressed to the lender as such Firstplus could and should have explained the way in which interest rates are varied in a precise and clear manner not in the ambiguous manner they did, this should have been relativity simple for them to do as they appear to be using a mathematical model of some kind ( a point I will return to). The call for explanation goes beyond merely pointing to a clause (that is misleading) in the small print. Also I would suggest to you that it should also be of concern to you that the loans where sent out with red crosses printed where the borrowers had to sign and with a covering letter that the effect (if not design) of this was to encourage the borrower merely to sign and return without proper scrutiny.
Not withstanding this obligation incumbent upon Firstplus I put it to you that even the most sophisticated of customers if presented with the loan as it was presented to me amongst the sales pitch documentation and within the context of Firstplus's advertisement would fall for the trick
It may also be useful to look at your own “Second charge lending– OFT guidance for lenders
and brokers 2009” on these points as the 1997 guidelines pre-date both the legislation and judgement as to fair and the guidelines are reflective of your present expectations and indeed present legislation. As such Firstplus would or should have been aware of their obligations here
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.
Returning to the clause itself:-
“we may from time to time vary our interest rate. we may increase or reduce our rate to reflect a change which has occurred, or which we reasonably expect to occur in interest rates generally or to ensure that our business is carried on prudently, efficiently and competitively. The interest rate on your account will not in any twelve month period, vary by more than twice the variation in the FHBR published by the FLA during the same period.”
this can have many interpretations and applications to date the application has been
1 if interest rates go up we will match that rise, if they fall we will not.
There are others
2 if interest rates rise we will increase ours by twice as much if they fall we wont reduce ours
both these alternatives favour the lender
or a logically fair interpretation
3 if (Bof E FHBR) interest rates rise we will increase ours if they( Bof E FHBR) fall we will reduce our rates
4 if interest rates go down we will match that fall, if they rise we will not.
5 if interest rates fall we will decrease ours by twice as much, if they rise we wont raise ours
and these last two favour the borrower
Ok this analyses is somewhat shallow but it is the basic position as I see it, below is a more detailed analyses and following that some view as to action that can be taken.
Going through the clause
“we may from time to time vary our interest rate” simply states the rate is variable at any time. They then go on to say “we may increase or reduce our rate to reflect a change which has occurred, or which we reasonably expect to occur in interest rates generally” this phrase allows for the interest rates to be varied in accordance with expectations they have ie that interest rates generally may go up if Bof E goes up , explicit in the use of the word Expect is that there is some deliberation over a rise or fall in their rates yet to ensure that our business is carried on prudently, efficiently and competitively.”However the way in which interest rates have moved indicates adherence to a precise mathematical or logical model, I see very little wrong with that in itself if that logical method is transparently stated. As applied I would suggest that wording the clause “We will raise our interest rates to reflect any upward change, or expected upward change in the FHBR, we will keep our rates unchanged if there is a downward change in the FHBR.” Would be an accurate reflection of this mathematical model.
Now the reference to the FHBR needs examination of what the FHBR is, this is defined on there website as “The rate is calculated at the end of each month by averaging the cost of three-month money in the interbank market over the previous eight weeks. The resulting figure is then rounded up to the next half point. The process is entirely arithmetical and contains no discretionary element.” A perfectly clear explanation of what is a reactive rate that in fact lags the libor rate by a number of months has an element that rounds up to the nearest half point and should in itself be adequate cushion for Firstplus especially as they stipulate that they can anticipate movements.
identifies criteria that may be used the
The interest rate on your account will not in any twelve month period, vary by more than twice the variation in the FHBR published by the FLA during the same period.
Now this demonstrates a clear ambiguity about the clause. If pursued under the “unfair Credit Relationship provisions” there could therefore be a number of remedies to the situation one may be to seek the most logical interpretation another may be to ignore the complaint, another may be to contrive to justify Firstplus's actions and another would be to seek the most favourable interpretation for the consumer in line with the common law principle of contra proferentum. I realise that should the action you take be to seek an injunction on the use of the current clause that you may not be able to apply this notion however the courts wide ranging powers could be used to ask for an order applying the most logical interpretation to the clause and asking for this to be applied to the loans either from the date of the agreement or from the date on which the provisions of the section 140 became applicable to the loan.
At this point I feel that I must highlight that on this issue I have concerns regarding the use of the rule of 78, the nature of changes to Firstplus's trading position, and the way in which the clause acts in relation to liabilities firstplus have as a result of mis selling PPI for brevity's sake I will address these issues in the UTCCR complaint to follow
Alternative to this action could be taken under regulation 7 of the UTCCR which specifically adresses ambiguity and status a position which is no more than a statutory codification of contra proferentum, however the OFT is limited in its application of this by regulation if it where to act by section 12. This I find to be somewhat perverse in that it may be the case that should the OFT act on the clause directly the consumer may be left in a position no better than if the OFT didn't act and that the consumer may have be in a worse position as action through the courts or FOS may be more difficult. Also it would seem perverse in this that: if a lender acted in accordance with the regulations and didn't cause detriment to customers, then they would have effectively lost out to the detriment causing lender, the detriment causing lender having merely to adopt a new non detriment clause, and keep all the current and future rewards for there wrongdoing.
rate on the loan remained the same at 10.5%. If we had known this when we agreed to the loan, we along with many others would never have gone ahead.
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