Reasonable pre-estimate or penalty?

[charitynjw]

I have recently seen a regulated credit agreement which contains a clause stating that, in the event of recovery action, a fee will be charged.
This is expressed as a substantial percentage of the outstanding amount payable under the agreement.

So, if person A owes, say, £2000, & person B owes £1000, then, by virtue of this clause, A will pay twice as much as B for what must be the same amount of 'work' necessary to recover the debt.

To decide whether this is unfair to A, or to both A & B (given the high percentage), I guess the questions would be

i) Is it an unfair term
ii) Is there any evidence to help calculate what a 'reasonable' charge would be, bearing in mind that there is a duty to mitigate the 'loss'

[shell]

Re: Reasonable pre-estimate or penalty?

Charity it seems unfair. Next thing you'll have the banks saying they will charge you a proportion of your overdraft or returned direct debits. Mmmmm...............

But I have another question to do with the CCA. I thought they were supposed to display the APR when advertising, but I've been keeping an eye on Wonga after noticing there is no APR in their ads and definately no APR for the last few weeks. Is this right?

[labman]

Re: Reasonable pre-estimate or penalty?

I have recently seen a regulated credit agreement which contains a clause stating that, in the event of recovery action, a fee will be charged.
This is expressed as a substantial percentage of the outstanding amount payable under the agreement.

So, if person A owes, say, £2000, & person B owes £1000, then, by virtue of this clause, A will pay twice as much as B for what must be the same amount of 'work' necessary to recover the debt.

To decide whether this is unfair to A, or to both A & B (given the high percentage), I guess the questions would be

i) Is it an unfair term
ii) Is there any evidence to help calculate what a 'reasonable' charge would be, bearing in mind that there is a duty to mitigate the 'loss'

This is a really interesting question. A quick read around is not giving any satisfactory answer I'm afraid, so it's down to gut instinct, and I suspect I'mlaying myself open to being tripped up with a gut instinct response to you (not that I mind you tripping me up! lol)

I would say it is probably not unfair as I suspect they are allowed to express this term as a percentage.

Part B do you mean a reasonable charge or a reasonable percentage? If the latter, I suspect there may be a maximum permissable percentage embedded deep in some law somewhere, but I also suspect that the law's idea of 'reasonable' and the consumer's idea of 'reasonable' are poles apart.

If I'm honest though, I haven't a clue.

I wonder also how this would fit with the Lending Code which states quite clearly that if someone is in financial hardship (Section 9) the creditor should avoid, wherever possible, taking any action which increases the level of indebtedness of the debtor? This seems to be diametrically opposed to that principle.

[charitynjw]

Re: Reasonable pre-estimate or penalty?

Further to this, would the term/condition be a 'core' term, thereby being incapable of assessment under, say, UTCCRs?