A New Way of Looking at Interest- 1st successful Claim - N'wide

[BankFodder]

I've been thinking for sometime about this question of interest. 8% seems a bit niggardly to me particularly when you think that the banks typically make 16% on overdrafts and far more on unauthorised borrowing.

I hadn't brought it up before but actually where a contract makes provision for a rate of interest to be paid on outstanding money, one does have the choice either of claiming that contractual rate of interest or merely claiming the 8% under the County Court act 1984.

So far we have been suggesting to everyone that they claimed the 8% because there is no express provision in the contract for a contractual rate of interest. However it seems to me to be quite arguable that there is an implied term in the bank contract based on the principle of "mutuality" or "reciprocity" -- in other words what is sauce for the goose is also sauce for the gander.

If this is correct then I think it is entirely reasonable to argue that where penalties have been unlawfully taken that this is the equivalent of borrowing by the bank and therefore the sum borrowed should attract a contractual rate of interest e.g. 16% - or if one wanted to say that the levying of penalties was unauthorised -- which of course it is -- then one could say that the contractual rate of interest was the unauthorised borrowing rate.

Maybe this latter rate is going a bit too far for the moment. However it seems to me that the bank's ordinary overdraft rate is entirely reasonable way to excercies mutuality.


An advantage of charging the contractual interest rate is that you can apply this even if the case does not go to court. The 8% is only available once the money is being claimed.

I can't see that this approach creates any risks for anyone unless it brings the amount claimed over the £5,000 limit. But if it doesn't then there is no problem. If the matter went to court then I would suggest that the N1 was worded to claim the contractual rate of interest or in the alternative, 8% pursuant to section 69 blah blah blah.

Of course if a claimant is attempting to recover the contractual rate of interest then the term (the implied term) has to be alleged in the particulars of claim.



Anyway there's the idea. Anyone got any comments?

[norvernrob]

It sounds completely reasonable to me, but do you think any bank could successfully argue that you are only entitled to 8% by law? (section 69 etc etc), and even if they did, would it then simply be a case that you get the claim plus 8% rather than the 16% you wanted?

I am only at the Data Protection Act stage with Yorkshire bank but I will be more than willing to try it out with those parasites if no-one else is willing to before then.

[mahala]

I didn't have an authorised overdraft facility at all, so when I went overdrawn, it was always the higher rate I was charged. I expect many people here are in the same boat. Would there be a case in that situation for charging the bank the unauthorised rate do you think?

Charging either rate is an interesting thought. I look forward to seeing what people think. I've just sent off my prelim letter to Barclays for £750, it would be nice to be able to add 16% interest to that!

[BankFodder]

There is no doubt that in law if the rate of interest is specified in the contract then you are entitled to claim that rate. That is the "contractual rate" of interest. It is only a question of arguing to the judge that there is an implied term which permits a contractual rate. In any other type of contract which interest is not referred to at all this would probably be impossible and you have to rely only on the 8% in court. However because you are dealing with a financial institution and there is an express rate of interest in the contract for the benefit of the bank when it lends money, in my view it now becomes possible to say that there is an equivalent term which benefits the customer when the bank owes the customer money.

I certainly don't see any risk. You simply have to claim the 8% under the County Court act in the alternative. You'll get one of them. Hopefully it will be the higher implied contractual rate.

Charging the unauthorised rate is of course much more attractive. The arguments are exactly the same and in theory if you could win on the basis of one being you could succeed on the faces of the other. The principle of mutuality is identical. It is simply that it seems a little bold to me. I would want to feel my way on this. But go ahead if you want. However you would have to start introducing the idea of this implied contractual rate in your preliminary letter. If you have already sent preliminary letter but you would like to increase your claim by the implied contractual rate of interest, then you should send another preliminary letter with the adjusted amount and explain how you arrived at that new total.

I think that it is worth trying. There is nothing to lose. It can't hurt.

If anybody tries this please keep me informed. It will be useful for others to know about

[alanfromderby]

It is my intention to apply for 16.9% on my Abbey claim - and have included that on my prelim letter which is due to be posted tomorrow.

Just to clarify - assuming that it gets to the court claim stage - which with Abbey seems to be the norm, would this do for additional wording on the Particulars of Claim:

"The Claimant also claims interest at a rate of xx% as set out in the attached list of charges. The Claimant believes this rate to be justified under the principle of mutuality and reciprocity, and is based on the Defendants overdraft interest rate that would be applied under the terms of the above mentioned account.

Should the court find that this interest rate is not applicable, then as an alternative the Claimant wishes to claim interest pursuant to section 69........"

[lookinforinfo]

I fear Bankfodder that you have opened a can of worms.
You are suggesting, I think, that we should attempt to reclaim that part of interest
that is applied to the unlawful charges of our debt at the same rate as the bank
levy it on us, rather than at 8%.

Easy to say but much more difficult to work out in practice, even assuming that
the Court would agree that the banks were indeed borrowing from us if that is the argument you would use.

To digress for a moment, when one pays a monthly credit card bill [assuming one doesn't redeem it all], then it is clearly stated in the T&C's how that money is applied. EG cash advances, current purchases, balances from other cards etc.-
which takes precedence.

Bank account T&C's do not have this provision. Therefore if you take as an example a £500 overdraft facility which now stands at £750 including £135 of unlawful charges and you then pay in £150, would the Bank, the Court or you take the
position that the £150 pays off the unlawful charge first? Or would the view be that
the charges would be the last to be paid? It is further complicated by the fact that if my bank account is anything to go by, that the balance is changing up
and down quite often, so the calculations can become extremely tricky and time
consuming. Not that that is a reason for not doing it, but the more complex it becomes, the easier it may be for the bank to query part of ones claim at least.

I am not against claiming the interest, in fact I think that 30% is bordering on
usury. And I fail to understand the logic behind the idea that someone who is
already in financial trouble should be subject to extra punitive interest rates and charges. it's hardly a system designed to get the debtor into anything but deeper debt.

[alanfromderby]

Originally Posted by lookinforinfo

Therefore if you take as an example a £500 overdraft facility which now stands at £750 including £135 of unlawful charges and you then pay in £150, would the Bank, the Court or you take the
position that the £150 pays off the unlawful charge first? Or would the view be that
the charges would be the last to be paid?

That is irrelevant, since the bank is indebted to the customer for the amount they have unlawfully taken - from they day they took it, to the day they repay it. That means the day the charge was levied, to the day of final settlement.

It makes no difference in this case what the balance of the account is - indeed the interest applied on the charge by the bank would still need to be added, and 16% (for instance) applied to that also.

[lookinforinfo]

Alan I think you missed the point of my argument. The thread is about interest on
unlawful charges not the actual charge. Bankfodder is suggesting that we claim back the interest levied on the unlawful charges not the interest on the whole amount.
We can only claim back interest that the bank has charged us on the unlawful charges. Thus in my example, we could only try and reclaim the interest on £135
of the overdraft, and if we paid off the whole overdraft the following day, then the
interest on the unlawful charge may only have been for two or three days and that is all we can claim for, regardless of how long before the unlawful charge is actually paid back to us by the bank. And no matter how many times we exceed our overdraft in the future, we
cannot claim for any more interest on that previous £135. We may claim interest on further unlawful charges but not on that £135.
I hope you can all see that. However the point I was trying to make was where
the amount paid in, while more than the unlawful charge, was less than the
unauthorized overdraft. And it was why I drew the analogy with credit cards as they stipulate in which order money paid in, reduces the outstanding amount on the card. ie what gets paid off first-I think that cash withdrawals for example are paid off last, so that if you keep a running balance each month, you can still be paying interest on a £20 cash withdrawal two years later despite not missing a monthly payment.
So back to my example £500 overdraft- £750 overdrawn, £135 in unlawful charges
and £150 paid in.
WE have to establish before making a claim how much interest we are being charged on our unlawful charges. My question was how will the Courts and
Banks treat the £150 payment? Will they say that the £150 pays off the £135
unlawful charge, in which case we cannot claim any interest on our overdraft from then on. Or will they take the view that the last thing to be paid off will be the bank charges, in which case we can claim interest from then until the overdraft is completely paid off.

[Spiceskull]

Hi Looking,

I think Alan has picked up on the other, rather more compelling argument. Cumulative penalty charges over the years have put him in the position that he is being charged interest on his account (an unnecessary overdraft) as well as on penalty charges. In this it could well be argued that he can claim the higher rate on ALL interest charges, not just the pro-rata penalty element.

Again, this argument is discussed elsewhere, and again, the application of the formulae will depend on the unique nature of each account. For example, this argument will not work on immature accounts (those that are less than six years old)

It really is a case of applying dilligence to whatever calculations you use, being able to explain and justify your calculations, and then letting the bank argue the toss. If they believe the calculations to be wrong, then the onus will be on them to demonstrate where your calculations are in error.

[alanfromderby]

Originally Posted by Spiceskull

I think Alan has picked up on the other, rather more compelling argument. Cumulative penalty charges over the years have put him in the position that he is being charged interest on his account (an unnecessary overdraft) as well as on penalty charges. In this it could well be argued that he can claim the higher rate on ALL interest charges, not just the pro-rata penalty element.

No, my account is not in overdraft, all charges that have been levied have been effectively paid. The argument is that the bank has had my money in their possession.

If I wanted an overdraft, the bank would charge me 16.9%

Effectively, they have unlawfully "borrowed" those charges from me for whatever period may apply for each individual charge.

If their contract says I should pay 16.9% when I borrow money off them - why shouldn't they pay 16.9% when they borrow money off me?

That is my understanding from Bankfodders original post on this thread.

[mahala]

that's what I understood to be the meaning of Bankfodder's post too. And I think the bank should have to pay the same sort of interest they charge us for borrowing.

[BankFodder]

I agree that calcualting the correct figure is difficult.
I means that you have to add up your charges.
Then add the actuall interest which the bank has levied each month on those charges.
Then you have to apply an interest rate equivalents to the bank's own rate at the time each charge was unlawfully taken.

However, as has been said, the bank charges you 16% when they lend to you. It seems quite just that you should be able to charge the same rate when you lend to the bank.

If the bank sued you for the total owing they could ask for their contractual rate of 16% rather than the s.69 rate of 8% - so why shouldn't you be able to do the same.

I agree that it is a lot of work - but financially it may be worth it. You still won't be making as much as the banks would because they would go on to their higher unauthorised rate which I don't recommend [lus they would be charging interest on interest - which would be for to tricky for most of us - except for Vampiress who I know could run up a stunning spreadsheet to take care of it all.

And of course, you don't need to do it. You can just fallback to the 8% if you want.

[lee6370]

and just when i'd managed to get the wording of my claim in the very limited space on money claim.

[thecornflake]

I presume that this can definitely be used agianst credit and store card companies then, as a contractual agreement is held stating rates?

Also finance agreements with companies such a G(rab) E(veryones) Money?