Thread: First Plus issues - when is variable rate not variable rate

I would be delighted for anyone with a legal background and experience of FP to get in touch with me. Without going into too much detail I work in business finance so understand the markets and now run my own business solutions brokerage. In the current economic climate, the business has had a tough 12 months and my situation has been adversely affected.

I took out a FP loan 4 yrs ago and have had problems during the last 12 months. IN short, Eversheds took over and we initially managed the arrears situation to Dec 07. After that they left me without contact or dialogue for 8 months. My first mortgage provider ( also with whom I and the business banks) ensured all of my surplus income went to their arrears and it was not until May when I was able to make payments to FP. I requested DD and feedback as to how to manage the arrears from FP without response. Suddenly, in AugustI received a letter giving me 7 days notice to clear arrears or face court action re possession. I complained to FP that 8 months of nothing then 7 days was not ideal and they, to be fair have offered me a manageable solution over 12 months without Eversheds or a suspended possession order hanging over me. I have to thank them for that.

However, I did ask about my repayments with them that have increased some £102 since inception as rate rises occurred and there is a pretty accurate correlation between BoE movement and their increases shortly after. The last year has seen base rate fall (albeit LIBOR and inter bank has been different) and there have been no reductions in my monthly repayment. The last time base rate was 5%, my payment was £383, now it is £455. They said, my loan wasn't linked to base rate, I said but it is variable and increased pretty much in line with BoE base rate increases....they said that was coincidence. I said it is variable so why has it not come down...they said that lending costs interbank have not come down... i said i understand that working in the industry but they were not the cause of my repayment increases as you stated earlier(ie they increased not because of changes in interbank rates but in a direct correlation with BoE BR)..and in fact they have now come down some 0.5% over the lst 2 months as I have Barclays cost of funds that they circulate to business brokers...so my account is either variable or not..they then said there was a link to FHBR and also a link to the arrears on my account.. i said repayments were increased when it was up to date...it just seemed the goalposts continued to move and to be fair to the girl I realised I was arguing beyond her skill level and agreed to defer the argument for another day.

I want to know if:

anyone has had similar situation with repayments increasing then not coming down

I read elsewhere that my loan may be unenforceable due to PPI commission nondisclosure, if so get in touch I will happily be a test case. I had a massive issue with how this was sold and their brokers mysteriously discovered my taped conversation had been "damaged". I have since begrudgingly accepted a far from satisfactory cancellation fee but if there is a wider issue in the current climate I would like to be aware

does anyone truly know how they calculate when repayments will change and are they in breach of anything by only taking repayments up in line with the market and not down in line with the market.

I look forward to any response and will gladly enter into any dialogue on or offline.

Regards

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This is what I posted on another thread but it gives more detail re base rate movement and payment changes if it helps anyone....

I have a secured loan with First Plus and have detailed my wider issues in another thread. However, part of my complaint to them centres around the way in which my repayment has changed since inception. I took out a £35k loan that attracted a PPI premium of some £6900, giving me a day one "advance" of £41900. My repayments were £353 day one. This was in Nov 2003. From Apr 2004 when BoE started to change base rates, my payments also started to increase to
£366 (Apr 2004)(base rate to 4% in Feb),
£373 (Jun2004)(base rate to 4.25% in May),
£388 ( Aug 2004)(base rate to 4.5 in June),
£393 (Jan 2005)(base rate to 4.75 in Oct 04),
£389 (Oct 2005)(base rate down to 4.5 in Aug 05)
£394 (Jan 2006)(base rate unchanged)
£400 (Mar 2006)(
£414 (Jan 2007)(base rate to 5 in Nov 06)
£433 (Mar 2007)(base rate to 5.25 in Jan 06)
£446 (May 2007)(base rate to 5.5% in May)
£455 (Aug 2007) (base rate to 5.75% in July)

since then there have been 3 increases down to 5% and no change in my repayment.

In my conversation with them they first said it was not linked to bank base, but I said your increases are pretty well in line with BoE movement. I said well it is variable so it is linked to something.

I said why hasn't it come down since July 07 they thne talked about thier own costs of borrowing. I said if you are linking me to LIBOR then you have never made that clear and secondly, can you demonstrate the movements in LIBOR that justified the increases in the first place.

Then they mentioned a caveat re FHBR that was in their terms.

I ended the conversation there saying I would undertake further research and put my findings in writing to them.

From what I see in here this is not simply a First Plus issue, many are being hit with the same scenario but are trying to be bamboozled by lenders talking of effects on funding costs etc etc.

Are the terms of my contract with FP able to be proven unfair by what is happening. If so, how do I go about it as I am passionate and skilled enough to take this fight up with them, either directly or via the Ombudsman.

ANy thoughts out there?"

Hi All!

Mark Wilson in reply to your post:

I
In general secured loans can be either base or LIBOR linked.

If base linked the rate could vary(either up or down) from month to month.

If LIBOR,the rate would vary either up or down every three months.

In either case,a notification would be sent to the borrower prior to new instlament due date.

I have a few questions to ask you:

1.Do you receive any written notifications prior to your monthly instalments changing?

2.If the answer is yes - what is the exact wording of these notifications?

I have the exact same issue with a secured Picture loan.
When the interest rates by the BoE were raised almost monthly they followed suit, their letters stating
"We are writing to inform you of a change to the interest rate of your picture loan. This change is in response to the recent Bank of England change to base interest rate. Your interest rate will increase by....."

However, when the Bank of England started to reduce the rates Picture did not follow suit. The rate remains sky high. When we queried this they sent us a flippant letter stating our rate is variable but not linked to the Bank of England base rate !!

"Picture Loans have a variable interest rate which means that the rates may go up or down within that given time period. There are a number of influencing factors, primarily the rate at which we lend money ourselves. Despite the Bank of England reducing their rates the rate at which we lend money has not altered so we are unable to adjust the rates we offer to customers ( this is because we are not directly linked to the Bank of England)"

Well, it is when they put the rates up. When the rate comes down it is no longer linked to that.
None of that is mentioned in the agreement with them, it simply states the rate is variable. Picture says " Specific details regarding Libor need not be discussed - this does not affect the compliance of a loan sale"

It is a complete disgrace if you ask me

I have asked First Plus for a copy of my loan agreement as I cannot find it anywhere. I want to know exactly what it says within my terms and conditions but if anyone out there with a First Plus loan has a copy letter that was sent the last time they increased repayments then I would love a copy.

My argument, like many is that variable rate is as it states and as such is linked or calculated on one specific formula, not simply something that suits a funder at any given point in time. I work in business finance and clarity is easy, most variable rate loans are linked to LIBOR, bank base or FHBR but it means they are mechanical and visible in calcualtion and consistency.

Here we have another area within a hugely regulated market that appears to rely on the bamboozlement of all and when challenged, throws up nothing in the way of substance.

I will take this as far as I need to if the evidence provided to me enables me to do so.

Originally Posted by Mark Wilson

but if anyone out there with a First Plus loan has a copy letter that was sent the last time they increased repayments then I would love a copy.

I can only offer a Picture one unfortunately but in there they clearly refer to the increase in the BoE base rate

This is the clause from a colleagues FP loan, I haven't received mine yet.

“We may from time to time vary our interest rate. We may increase or reduce our interest rate for one or more of the following reasons, namely, to reflect a change that has occurred or which we reasonably expect to occur in interest rates generally or to ensure our business is carried on prudently, efficiently and competitively.”

First Plus Secured Loan, Terms and Condtions, Point No 8.

Clearly this is vague and lender friendly but how unfair or unenforceable it is I have no idea at all.

I would love to take them to task if there is anything untoward but I don't know what I have to fall back on as legal precedent or case.

According to my colleague FP justified his repayment increases on the back of B0fE rate increases, he is digging out a letter for me.

Originally Posted by Mark Wilson

This is the clause from a colleagues FP loan, I haven't received mine yet.

“We may from time to time vary our interest rate. We may increase or reduce our interest rate for one or more of the following reasons, namely, to reflect a change that has occurred or which we reasonably expect to occur in interest rates generally or to ensure our business is carried on prudently, efficiently and competitively.”

First Plus Secured Loan, Terms and Condtions, Point No 8.

Clearly this is vague and lender friendly but how unfair or unenforceable it is I have no idea at all.

I would love to take them to task if there is anything untoward but I don't know what I have to fall back on as legal precedent or case.

According to my colleague FP justified his repayment increases on the back of B0fE rate increases, he is digging out a letter for me.

It is very much like what Picture wrote into their agreements and what it states in our one.
It is totally vague and non-specific. Picture says they can increase their rate 'when a change occurs' but not what change that would be. It could be a change in the weather for all you know as a consumer.
Picture says however it is legal and specifics need not be disclosed or discussed as part of the agreement.

What I really need to know from someone with any legal acumen is just exactly how we get these funders to come clean about what exactly they take into account when calculating changes to repayments.

As we are seeing, repayments only go one way.

I have had a 28% rise in repayments over the first 4 years of my agreement. Day one I borrowed £35000 plus £6900 in PPI at a repayment of £355 per month. TAP £106500 over 25 yrs. Works out at a flat rate of 6.16%. £455 over 25 yrs though is £136500 is a 9% flat rate equivalent.

This is a 50% increase and I am not even 5 years in yet!!!!! No measure of change in funding cost, that they can justify applying, can demonstrate a 50% change during the first 4 years of the agreement. ( I say that as the payment has remained at £455 during the last 12 months when Bof E rate has gone down and LIBOR has been allover the place).

We can't be on our own in this surely?

Any help out there?

I am with you, but to be fair, I have hit a brick wall with Picture. They say they do not have to disclose or discuss as part of the agreement what they base their interest rates on. All that matters is that the rate is variable at their discretion. They apparently do not have to be more specific.

I think the only way forward would be to complain to a regulator or official body like the Ombudsman and see what they say ?

Not sure if there is any further advice from site admin on this ?

I have today received a copy letter from a colleague of mine who is also struggling along with FP. Although it is quite old the wording FP used when applying a rate increase was...

"The most recent Bank of England decision forces FP to increase APRs for all accounts from ....

As a result your monthly repayment will increase to £.... to reflect your new APR of ...%"

I see nothing here that is open to any debate as to why the repayment increased...

Want a bet whether the latest cuts will be passed on ? Libor is apparently down to 4.49% the lowest since 2004....I am waiting for the letter from Picture , currently our rate with them is over 10%....

Mark we too had a secured loan with FP but the sold the house but still left a deficit of about £5700 which was made up of interest charges. We contacted FP on numerous occasions in 2006 trying to illict a response from them regarding payments. Initially they insisted on the full instalment being paid until we pointed out that we had sold because we could not afford the repayment which was in excess of £550 per month.
Eventually they spread the payments out of the remainder of the term which was about 11 years bring the repayments down to about £62 per onth which suited us at the time. About 18 months ago we increased the payments to £80 per month paying by standing order.
In August this year we got a cheque from FP for £120 stating that we had overpaid FP. I phoned in and queried this and was told the same again. Anyway as we were short of money I banked the cheque. A week later I got a demand from them stating that we were in arrears with the account to the tune of £80. I questioned this and was told that I was supposed to pay my instalment on the 1st of every month which I was doing by standing order and as a result they were only receiving the funds on the 7th of the month, but hang about as the majoirty of the loan is paid off, surely I am well in advance etc.
On questioning this further and writing a threatening letter, it transpired that in May they credited my account twice with the same amount which then resulted in our account being seriously overpaid hence the repayment.
I questioned paying more than was requried and was told that we could not do this as it is stated in the terms and conditions. I mentioned that the T & Cs applied to a secure loan and not an unsecure load as it is now as it is not secured on property. No answer! No surprise.
Although in 2006 our payments were a bit erratic, in 2007 up to present they have been consistent, regular and over and above the required amount. Originally £5700 but a statement last month showed that we still owed £5607. Although we have paid nearly £1700 in the past 2 years the amount owing has only reduced by about £80. Something seriously wrong somewhere and I am going to challenge it. Off to see CAB on Monday.
can any one offer any advice to us who feel that FP are ripping us off big time through their ineptitude?

Talk to the CAB first and it may be worth taking the matter to the fos as well
Also a SAR may be on the cards to find out why the account is still so high. You need to establish if they have whacked on some charges and if yes why.

They did add on some charges amounting to about £400 but interest is about £45 per month although APR is supposed to be in the vicinity of 10%. SAR sounds like a good idea but I will also request that they advise every time the interest rate changed.

Originally Posted by Surfer01

I will also request that they advise every time the interest rate changed.

You should have had a letter 1 month before every time. When the loan changed from secured to unsecured, surely the rate was no longer variable ?
How bizarre. Take all your papers to the CAB and make a SAR to see exactly what was going on

First Plus have essentially told me there ts and cs mean they can set interest rate at any level they like to maintain their profitability, competitiveness etc etc. I am taking this further and since the BoE cut and LIBOR movement, they had better do something significant.

If you get any movement from a secured lender DOWNWARD let me know as I have not seen any yet (not mortgages they are working differently0. My argument with FP will centre around them selling "varialbe rate" loans that clearly are not variable in the true sense of the word, not in the way the general public would understand and essentially allow them their hidden agenda to edge everyone's rates up over time and hold them there. They know the interest rate cycle over 25 years will allow increases and that their ts and cs cover them in all the downward cycles. Not fair but not necessarily illegal but something that works in this way, I feel, must be disclosed at POS as it would have affected my decision to take the loan.

I agree . I assume you have not had a letter from them yet to reduce the rate by 1.5 % ?
(No, me neither...)
I will be watching this thread with interest