Written by John Kruse, one of the leading experts on Bailiff Law, this consumer friendly guide is essential reading for anyone who comes into contact with a bailiff.
The book is easy to understand and clearly explains the rights
a bailiff has, and also what they cannot do when collecting debts and repossessing goods etc.
extract i found
......................... .....................
The government also introduced new rules giving people who want to repay their loan early a fairer deal, abolishing the so-called rule of 78. The rule was one way in which lenders calculated how much interest a borrower should have paid at any stage of the repayment period of a fixed-rate loan they had taken out. While not unusual on credit agreements, it remained a mystery to many consumers.
Lenders will still be able to recoup some of the administration costs involved in settling a debt early, but the government has introduced a new way of calculating how much this will be that is fairer to borrowers.
Richard Mason, director of personal loans at price comparison website moneysupermarket.com, said: "The rule of 78 is an archaic and confusing calculation which has finally been overhauled. Consumers should not be heavily penalised for repaying their loan early and trying to get out of debt."
He added that on a £10,000 loan arranged over five years, three out of five leading loan providers would charge a fee for early repayment, and that only nine of the 70 providers listed on his website did not charge any redemption penalties. They are: American Express, cahoot flexible, Egg, Goldfish, Intelligent Finance, Virgin, Morgan Stanley, Northern Rock and the Post Office.
Mr Mason continued: "This new method of charging may also encourage consumers to switch between different loan providers and not feel tied in to one provider for a long period of time, thus allowing them to benefit from the many low-rate loans that keep joining the market.
"It is not out of the question that we'll see a similar trend to that experienced in the mortgage and credit card market, whereby consumers will switch and move providers to constantly utilise the best deals." The abolition of the rule applies only to new loans. Existing loans, for terms of ten years and under, will be covered from May 31 2007. Existing loans of a longer duration will be covered from May 31 2010.
......................... ....
Now as far as i am concerned the Government abolished the rule. Therefore it found it an unfair or unjust way of settling a debt. S o it it was unfair or unjust then it is unlawfull by english law and a breach of contract. I notice the ruling only includes new loans. but why change it unless it was unlawfull in the first place?
Dont think it has broken a law as such. However why change it if it was deemed as fair. The only legal question i have is that if banks cannot calculate early repayment using rule 78 as it was unfair to the borrower then is it against the true costs involved to the bank to cancel the agreement. seems like a punishment for clearing a debt early, which you would have thought was a good thing. I am just questioning the rule 78 due to the huge amount of credit charged for the PPI. It cost me £3849 in early payment on the PPI alone after borrowing a sum for 6 months.
I just feel its unfair as I kept payments on the policy up togther and the charge for redemtion is dispoportionate to the actual cost to themselves to cancel it.
I think i know what im trying to say. wonder if anyone has gone down this route.
I challenged the Rule of 78 with Firstplus when the Charged me £760 + in early Settlement Interst Charge.
They did not like that..lol I had Issued summons and was due in Court on 5/2/07 - But guess What they Crapped it on Friday and settled in full on the condition I dismissed the case through Dundee Sheriff Court. I Got the cheque this morning which Included interest and Court Fees.
So simply the answer to your Question...YES you can challenge the rule of 78 and if you want to see the legal arguements etc I used let me know.
Though Firstplus said that their Legal Eagles did not agree with my legal Arguements and that they were Flawed (xxxxxxx..lol). they paid up as a gesture of goodwill of course.
Ian
Lloyds TSB -PPI - Full refund . 05/09/06 (As Seen on TV)
Halifax settled in Full.. 22/09/06
TSB First Claim SETTLED IN FULL 19/10/06
Second Claim to Lloyds TSB - Settled in Full
Firstplus - early settlement interest charges - Challenged the use of the rule of 78 - SETTLED IN FULL 12/1/07
PPI - GE Money / Purpleloans / Firstplus - Now Settled after 1 year long hard fight.
If my post has helped you, please click the scales! :grin:
Anything said is my opinion and how I understand the law, always consult professional legal advice before taking something to court.
In Fact ..Here is the Claim I submitted..You will notice as a gesture of goodwill on my part I agreed to pay £14 odds..This was simply to get the claim down to the £750 Limit here in Scotland.. I must be getting generous in my old age..lol
STATEMENT OF CLAIM
Case ref:
in causa
XXXXXXXX
v. XXXXXXXXXXXXXXXX
1) The parties are designed in the instance. This pursuer is a consumer within the meaning of paragraph 3 to schedule 8 of the Civil Jurisdiction and Judgments Act 1982 as amended. The Credit Agreement was completed at the pursuer’s home address. This court accordingly has jurisdiction. No proceedings are pending elsewhere between the parties hereto in respect of the subject matter of this action. To the knowledge of the pursuer, no agreement exists between the parties prorogating jurisdiction of the subject matter of the present cause to another court.
2)The claimant, XXXXX, agreed to take out a personal loan through brokers YYYYYYYYYY who at the time were acting as agents for ZZZZZZZZZZZZZZZ. After the agreement had been running for some 30 months, the pursuer settled the loan in full with ZZZZZZZZZZZZZZ. The defender then charged a penalty charge in way of an early settlement interest charge of £764.97. This charge does not in any way represent a liquidated loss incurred by the defender but in fact is a penalty charge.
3) The defenders are called upon to lodge in process a statement indicating how much annual pre-tax profit is generated from applying early settlement interest charges to early settled accounts. The defender is also called upon to produce actual proof that the sum of £764.97 is a liquidated loss incurred. Their failure to do so will be founded upon. The Pursuer has agreed to pay the sum of £14.97 in terms of settlement for this early cancellation and is therefore claiming the sum of £750.00 in way of refund.
4) The defenders charges represent a contractual penalty or fine and as such are irrecoverable at Scots common law. In the case of Castaneda and Others v. Clydebank Engineering and Shipbuilding Co., Ltd. (1904) 12 SLT 498 the House of Lords held that a contractual party can only recover damages for actual or liquidated losses which flowed from a breach of contract. The defenders charges are not liquidated losses and therefore the pursuer is entitled to be reimbursed in the sum craved.
5) Separatim, the defenders charges represent an unfair penalty charge in terms of the Unfair Terms in Consumer Contracts Regulations 1999 (SI. 1999/2083) (the ‘UTCC’). The pursuer’s contract falls within the ambit of Regulation 5 of the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) as the pursuer is a consumer. The defenders charges constitute an unfair penalty under reference to paragraph 1(e) of schedule 2 of the said regulations:
‘Indicative and non-exhaustive list of terms which may be regarded as unfair
1.Terms which have the object of effect of
(e) requiring any consumer who fails his obligation to pay a disproportionately high sum in compensation’.
Reference is made to the following three cases from the Office of Fair Trading’s Unfair Contract Terms Bulletin 21 (July to September 2002), issued in May 2003:
OFT case 15 – Kids of Wilmslow Ltd.
Clause 7 of the company provided for the supplier to charge interest on unpaid fees at an excessive rate above the bank base rate. Also unclear as to how the interest would be charged. The OFT amended the clause so interest was charged on unpaid fees at 3% per annum above the bank base rate. Further, an administration fee of £10 per letter sent concerning unpaid fees was deleted.
OFT case 18 – Legal & General Franchising t/a Parker Estate Agents.
A commission clause had the potential to allow the estate agent to charge a penalty fee for late payments. The OFT revised the clause to reflect the company’s practice of charging 8% per annum or the current rate of county court interest on late payments.
OFT case 4 – Dampcure-Woodcure/30Ltd.
Clause ‘W’ had the potential to impose a high financial penalty of payment was not received within seven days of the date of invoice. The OFT revised same to make clear that interest will be charged at 4% above a high street bank rate per annum if payment not received within 7 days of the date of invoice.
Accordingly, the defenders are fairly compensated for unauthorised lending by the imposition of their unauthorised overdraft interest rate currently at 29.8% APR. The imposition of further charges is unfair in terms of the UTTC. Reference is made to guidance issued by the OFT on 26 July 2005, which stated that 'a charge is likely to be disproportionately high if it is more than a court would be likely to award if the lender sued the account holder for breach of contract'. The court is asked to declare the imposition of the defender’s charges as unfair and irrecoverable in terms of the UTTC.
Furthermore the pursuer would suggest the law relating to penalties has been established through case law. The cases date back to the nineteenth century and the courts have been consistent in the way that they have ruled on penalty clauses:
Wilson v. Love (1896)
A tenant farmer agreed to pay an additional rent of £3 per ton by way of penalty for every ton of hay or straw that he sold off the premises during the last 12 months of the tenancy. The clause was regarded as a penalty because at the time hay was worth five shillings a ton more than straw.
Dunlop Pneumatic Tyre Co. Ltd. v. New Garage and Motor Co. Ltd. (1915)
In the particular case, the judges held that the sum specified in the contract was reasonable and was classified as liquidated damages. However, in this case, Lord Dunedin laid down rules which are still applied today in these types of cases:
i) The sum is a penalty if it is greater than the greatest loss which could be suffered from the breach – in other words, if it is "extravagant and unconscionable".
ii) If it agreed that a larger sum shall be payable in default of paying a smaller sum, this is a penalty. Ford Motor Co. v. Armstrong (1915)
In this case, the judges reached the conclusion that the sum to be paid for a breach of the contract was substantial and arbitrary and bore no relation to the potential loss of the other party. It was, therefore, a penalty.
Bridge v. Campbell Discount Co. Ltd. (1962)
In this case a customer bought a car under a hire purchase agreement. He paid the initial and first payments and then cancelled the agreement. The company tried to recover the sums specified in the contract for canceling the agreement, but the courts held that the sums payable were excessive and constituted a penalty clause. It was, therefore, unenforceable.
6) The pursuer being entitled to reimbursement of the defender’s charges, decree as craved should be granted with expenses. The Claimant also claims interest at a rate of 8%, from the date of settlement to 20 November 2006 of £5.87. The claimant further claims interest at the rate of 8% APR up to the date of judgment or earlier payment, at a daily rate of £0.17 per day.
7) The pursuer has demonstrated to the defendant the reasons he is requesting a refund of all penalty charges in letters dated 17 October 2006, 02 November 2006 , 10 November 2006 and 17 November 2006. (these letters and a copy of the agreement are attached for you perusal). all correspondence from defendant is also attached for perusal. 8) ZZZZZZZZZZZ calculated the Early Settlement Interest Penalty Charge under the Rule of 78. The FSA recommended that all companies refrain from using this Rule with effect from May 2005. The FSA themselves viewed the Rule of 78 to be unfair to consumers. From the FSA website Early repayment charges (Early Settlement Interest Penalty Charge)
To use a method called the 'Rule of 78' to calculate a consumer's early repayment charge.
“We viewed this as unfair because it could result in the consumer paying a charge much higher than would reasonably compensate the firm for charges lost through early repayment.”
This charge represents an unfair penalty charge in terms of the Unfair Terms in Consumer Contracts Regulations 1999 (SI. 1999/2083) (the ‘UTCC’).
The regulations that applied to ERC's for regulated loans, ie those under 25,000, changed in May 2005. After this date, lenders have only been allowed to charge 1 month's interest as an ERC.
Summary of Claim
Unlawful Early Settlement Interest Penalty Charge £750.00
Interest on above from 16/10/06 to 21/11/06 £ 5.87
Court Fees £ 39.00
Juditial Interest @ 8%APR - Days @ £0.17 / Day Total of Claim £794.87
Lloyds TSB -PPI - Full refund . 05/09/06 (As Seen on TV)
Halifax settled in Full.. 22/09/06
TSB First Claim SETTLED IN FULL 19/10/06
Second Claim to Lloyds TSB - Settled in Full
Firstplus - early settlement interest charges - Challenged the use of the rule of 78 - SETTLED IN FULL 12/1/07
PPI - GE Money / Purpleloans / Firstplus - Now Settled after 1 year long hard fight.
If my post has helped you, please click the scales! :grin:
Anything said is my opinion and how I understand the law, always consult professional legal advice before taking something to court.
5.9 Typically, if a single premium PPI policy is cancelled outside the statutory
cancellation period, the customer does not get a pro-rata refund. At five of
the firms that we visited, we came across PPI contracts that provided for no
refund upon early cancellation. This is a significant limitation of a policy and
should be drawn to the customer’s attention in the Policy Summary. Some
contract clauses provide no option for continuing cover and no refund when
the customer repays the linked credit product early. We consider such nil
refund clauses may be unfair under the Unfair Terms in Consumer Contracts
Regulations 1999. We will be asking the insurers concerned to justify their
use of such terms in their single premium PPI policy documents.
5.10 In most other cases, the amount refunded was so unfavourable to the customer
that we would have expected it to be drawn to the customer’s attention as a
significant limitation of the policy and included in the Policy Summary. This
disclosure should have been done in a way that meets the requirement on firms
to treat their customers fairly (Principle 6) and to provide information in a way
which is clear, fair and not misleading (Principle 7 and ICOB 2.2.3R). This is
especially an issue where it is likely that the consumer may terminate their loan
early and is also an issue where PPI is sold with hire purchase agreements (see
para 5.12). This should be considered as part of the suitability assessment in an
advised sale where flexibility is part of the customer’s needs.
5.11 Of the 24 firms we visited selling single premium contracts, customers were
not given the level of information we would expect on the position on refunds
by around four-fifths of these firms. In some cases where we questioned sales
staff, they did not understand the position on refunds or even that they were
selling customers single, rather than regular, premium policies. This was
particularly an issue in many of the motor dealers we visited.
In October 2003 I took out a loan with your company. The loan was for £22,000 plus charge for credit @ 8.9 % amounting to £8456.80. This totalled £30,465.80.
I also took out a credit Protection Insurance which amounted to £7093.39 (including Insurance Premium Tax) Plus charge for Credit @ 8.9% amounting to £2725.40. This totalled £9815.40.
Therefore the total loan amounted to £40,275.59.
Seven months later I paid the loan off and a refund of the Credit Protection Insurance was calculated at 1 May 2004 of £5,966.00. This makes a difference of £3849.40 between the amount including tax and interest of £9815.40 and the rebate of £5,966.00. I had also paid the Premium of £102.25 per month for 7 months.
Please advise me if these figures are incorrect by sending to me supporting documentation, including any notes, recorded telephone conversations, letters and agreements. I have enclosed a fee of £10.00 which is the maxium that is chargeable under the Data protection Act, I also understand under the Act that I should recieve the Documents within 40 days of this letter. However, if you agree to the figure above of £3849.40 which is in dispute by me, then please let me know within 14 days.
The reason of this letter is that I beleive I was mis-sold the policy in a number of ways.
1/ That as the Bank knew I was selling my home at the time, they did not advise me correctly by warning me of the cost of paying off the Credit Protection Insurance.
2/ I felt pressurised to take out the Credit Protection Insurance otherwise I may not have been successfull in obtaining the loan.
3/ The bank knew I was in a vulnerable state of mind and therefore, took advantage of my situation.
4/ The use of the Rule 78 to calculate a refund has now been shown to be unfair and unreasonable to the customer and banks are no longer able to use this rule in rebates.
5/ I also find it unfair that I have been advised to pay off previous loans by obtaining further more expensive loans including the PPI insurance heavey penalty charges, this has happened on more than two occasions for which I will investigate further should we not come to an agreement.
Therefore, I am asking from you to rebate me the sum of £3849.40 plus interest. I look forward to your response to this letter within 14 days to inform me of the action you will be taking.
......................... .............
Before sending this any advise would be great. I am quite prepared to go all the way on this one as I feel these charges are not fair in the eyes of the law.
Maybe i should just write to them first with the details just to make sure they are correct, or maybe leave it up to the bank to correct me if i am wrong.
Hi Rich,
That will do for your initial complaint, they will of course deny any wrong doing etc etc. Once you have a response from them let me know and we can take it from there.
I would also add COMPLAINT in bold characters at the top of your letter.
Ian
Lloyds TSB -PPI - Full refund . 05/09/06 (As Seen on TV)
Halifax settled in Full.. 22/09/06
TSB First Claim SETTLED IN FULL 19/10/06
Second Claim to Lloyds TSB - Settled in Full
Firstplus - early settlement interest charges - Challenged the use of the rule of 78 - SETTLED IN FULL 12/1/07
PPI - GE Money / Purpleloans / Firstplus - Now Settled after 1 year long hard fight.
If my post has helped you, please click the scales! :grin:
Anything said is my opinion and how I understand the law, always consult professional legal advice before taking something to court.
In October 2003 I took out a loan with your company. The loan was for £22,000 plus charge for credit @ 8.9 % amounting to £8456.80. This totalled £30,465.80.
I also took out a credit Protection Insurance which amounted to £7093.39 (including Insurance Premium Tax) Plus charge for Credit @ 8.9% amounting to £2725.40. This totalled £9815.40.
Therefore the total loan amounted to £40,275.59.
Seven months later I paid the loan off and a refund of the Credit Protection Insurance was calculated at 1 May 2004 of £5,966.00. This makes a difference of £3849.40 between the amount including tax and interest of £9815.40 and the rebate of £5,966.00. I had also paid the Premium of £102.25 per month for 7 months.
Please advise me if these figures are incorrect by sending to me supporting documentation, including any notes, recorded telephone conversations, letters and agreements. I have enclosed a fee of £10.00 which is the maxium that is chargeable under the Data protection Act, I also understand under the Act that I should recieve the Documents within 40 days of this letter. However, if you agree to the figure above of £3849.40 plus interest,which is in dispute by me, then please let me know within 14 days.
The reason of this letter is that I beleive I was mis-sold the policy in a number of ways.
1/ That as the Bank knew of my intention of selling my home to repay the loan within months rather than years from the outset. In fact after the loan interview I then had an interview from your mortagage adviser to see how much I could borrow after I redeemed the debt including the PPI insurance. I was advised it best to re apply after some months had passed to be considered for further consideration.
2/ I felt pressurised to take out the Credit Protection Insurance otherwise I may not have been successfull in obtaining the loan. Please provide any alternative illustration I was offered as an alternative to the illustration given excluding the Credit Protection Insurance.
3/ At no time was I advised to compare the benefits of my new employment as a ..............regarding unemployment, sickness, death and disability for which every individual circumstances must be taken into account.
4/ The use of the Rule 78 to calculate a refund has now been shown to be unfair and unreasonable to the customer and banks are no longer able to use this rule in rebates.
5/ On my policy document there is no mention of a previous claim which I discussed, of a disabilty which I claimed for on a previous insurance though HSBC which may have made a claim invalid. If this is not the case then please provide evidence.
In conclusion I submit that I was miss-sold the Credit Protection Insurance as the bank representative knew of my intention of redemeeming the loan early, He did not discuss or offer any alternative therefore indicating that the insurance was compulsory, or take into account my new employment, or advise me of the early penalty charge, for which I would have then have declined the Insurance in question. I feel the Adviser was motivated to sell me the Policy due to financial gain for himself and/or the Bank and did not take into account my personal circumstances.
I am asking from you to rebate me the sum of £3849.40 plus interest. I look forward to your response to this letter within 14 days to inform me of the action you will be taking.
......................... ......
will be sending this off tomorrow unless advice is otherwise.
Recieved letter back from HSBC.
..................
Thank you for your letter dated 20 jan 2007 concerning the personal loan protection policy taken in October 2003. This has been forwarded for my attention.
I am looking into the matters you have raised and will contact you with a full response as soon as I have completed my investigations.
In the meantime, I enclose a copy of our leaflet which explains how these matters are dealt with. If you need to contact us please quote the reference.
......................... ........
I will post again soon as I recieve a better reply. I will wait 14 days until I persue again if I dont recieve a reply.
rich
ps Could somone change the heading to Rich vs HSBC PPI Please
Hi,
Remember and stick to your timescales.. They will mess you around with their usual crap like we have so long to look into complaint etc etc.
Ian
Lloyds TSB -PPI - Full refund . 05/09/06 (As Seen on TV)
Halifax settled in Full.. 22/09/06
TSB First Claim SETTLED IN FULL 19/10/06
Second Claim to Lloyds TSB - Settled in Full
Firstplus - early settlement interest charges - Challenged the use of the rule of 78 - SETTLED IN FULL 12/1/07
PPI - GE Money / Purpleloans / Firstplus - Now Settled after 1 year long hard fight.
If my post has helped you, please click the scales! :grin:
Anything said is my opinion and how I understand the law, always consult professional legal advice before taking something to court.
Having recieved a letter i telephoned the bank as I havnt heard from then since i got the letter saying they are lokking into it. I asked for a Breakdown of the redemtion figures including the amount of PPI and interest I paid back, and if there is any decision yet.
HSBC seem to be interested in my complaint as they are keeping me informed about progress but the manager is sick and is back to sign a letter to send to me. I am waiting to see the content before I continue.
Recieved a letter from the bank trying to justify thier use of rule 78 when calculating the redemtion figure. They didnt bother to reply to any of my points on the insurance itself, just the whole loan for which I am not persueing at this stage. my reply......
Thank you for your letter dated 22nd March 2007 recieved today.
The letter regarding the repayment of the loan and the way it was calculated is noted. However, if I can refer you back to my original complaint, it is regarding the Protection insurance that was added to the loan including interest, that in my opinion was missold to me and the cost of redeming that insurance as an addition to the original loan of £22,000 plus interest.
Therefore, I am requesting that you repay me the amount that I have calculated only regarding the insurance and the cost of it that was charged to me, as an addition to the amount borrowed. My calculations are that I was charged £3849.40 for which I was also deprived of interest on that amount from October 2003. I also paid £102.25 for 7 months.
If you dispute these figures or if you need a copy of my letter dated 20/01/07 where I have detailed the reasons I beleive I was missold the insurance, please let me know by return. If you wish to email me my Address is ccart944@aol.com
I look forward to hearing from you regarding this situation as i beleive I have been unjustly sold an insurance that I did not need and would not have taken if the full cost was discussed with me at the time.
Yours sincerely,
In Fact ..Here is the Claim I submitted..You will notice as a gesture of goodwill on my part I agreed to pay £14 odds..This was simply to get the claim down to the £750 Limit here in Scotland.. I must be getting generous in my old age..lol
STATEMENT OF CLAIM
Case ref:
in causa
XXXXXXXX v. XXXXXXXXXXXXXXXX
1) The parties are designed in the instance. This pursuer is a consumer within the meaning of paragraph 3 to schedule 8 of the Civil Jurisdiction and Judgments Act 1982 as amended. The Credit Agreement was completed at the pursuer’s home address. This court accordingly has jurisdiction. No proceedings are pending elsewhere between the parties hereto in respect of the subject matter of this action. To the knowledge of the pursuer, no agreement exists between the parties prorogating jurisdiction of the subject matter of the present cause to another court.
2)The claimant, XXXXX, agreed to take out a personal loan through brokers YYYYYYYYYY who at the time were acting as agents for ZZZZZZZZZZZZZZZ. After the agreement had been running for some 30 months, the pursuer settled the loan in full with ZZZZZZZZZZZZZZ. The defender then charged a penalty charge in way of an early settlement interest charge of £764.97. This charge does not in any way represent a liquidated loss incurred by the defender but in fact is a penalty charge.
3) The defenders are called upon to lodge in process a statement indicating how much annual pre-tax profit is generated from applying early settlement interest charges to early settled accounts. The defender is also called upon to produce actual proof that the sum of £764.97 is a liquidated loss incurred. Their failure to do so will be founded upon. The Pursuer has agreed to pay the sum of £14.97 in terms of settlement for this early cancellation and is therefore claiming the sum of £750.00 in way of refund.
4) The defenders charges represent a contractual penalty or fine and as such are irrecoverable at Scots common law. In the case of Castaneda and Others v. Clydebank Engineering and Shipbuilding Co., Ltd. (1904) 12 SLT 498 the House of Lords held that a contractual party can only recover damages for actual or liquidated losses which flowed from a breach of contract. The defenders charges are not liquidated losses and therefore the pursuer is entitled to be reimbursed in the sum craved.
5) Separatim, the defenders charges represent an unfair penalty charge in terms of the Unfair Terms in Consumer Contracts Regulations 1999 (SI. 1999/2083) (the ‘UTCC’). The pursuer’s contract falls within the ambit of Regulation 5 of the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) as the pursuer is a consumer. The defenders charges constitute an unfair penalty under reference to paragraph 1(e) of schedule 2 of the said regulations:
‘Indicative and non-exhaustive list of terms which may be regarded as unfair
1.Terms which have the object of effect of
(e) requiring any consumer who fails his obligation to pay a disproportionately high sum in compensation’.
Reference is made to the following three cases from the Office of Fair Trading’s Unfair Contract Terms Bulletin 21 (July to September 2002), issued in May 2003:
OFT case 15 – Kids of Wilmslow Ltd.
Clause 7 of the company provided for the supplier to charge interest on unpaid fees at an excessive rate above the bank base rate. Also unclear as to how the interest would be charged. The OFT amended the clause so interest was charged on unpaid fees at 3% per annum above the bank base rate. Further, an administration fee of £10 per letter sent concerning unpaid fees was deleted.
OFT case 18 – Legal & General Franchising t/a Parker Estate Agents.
A commission clause had the potential to allow the estate agent to charge a penalty fee for late payments. The OFT revised the clause to reflect the company’s practice of charging 8% per annum or the current rate of county court interest on late payments.
OFT case 4 – Dampcure-Woodcure/30Ltd.
Clause ‘W’ had the potential to impose a high financial penalty of payment was not received within seven days of the date of invoice. The OFT revised same to make clear that interest will be charged at 4% above a high street bank rate per annum if payment not received within 7 days of the date of invoice.
Accordingly, the defenders are fairly compensated for unauthorised lending by the imposition of their unauthorised overdraft interest rate currently at 29.8% APR. The imposition of further charges is unfair in terms of the UTTC. Reference is made to guidance issued by the OFT on 26 July 2005, which stated that 'a charge is likely to be disproportionately high if it is more than a court would be likely to award if the lender sued the account holder for breach of contract'. The court is asked to declare the imposition of the defender’s charges as unfair and irrecoverable in terms of the UTTC.
Furthermore the pursuer would suggest the law relating to penalties has been established through case law. The cases date back to the nineteenth century and the courts have been consistent in the way that they have ruled on penalty clauses:
Wilson v. Love (1896)
A tenant farmer agreed to pay an additional rent of £3 per ton by way of penalty for every ton of hay or straw that he sold off the premises during the last 12 months of the tenancy. The clause was regarded as a penalty because at the time hay was worth five shillings a ton more than straw.
Dunlop Pneumatic Tyre Co. Ltd. v. New Garage and Motor Co. Ltd. (1915)
In the particular case, the judges held that the sum specified in the contract was reasonable and was classified as liquidated damages. However, in this case, Lord Dunedin laid down rules which are still applied today in these types of cases:
i) The sum is a penalty if it is greater than the greatest loss which could be suffered from the breach – in other words, if it is "extravagant and unconscionable".
ii) If it agreed that a larger sum shall be payable in default of paying a smaller sum, this is a penalty. Ford Motor Co. v. Armstrong (1915)
In this case, the judges reached the conclusion that the sum to be paid for a breach of the contract was substantial and arbitrary and bore no relation to the potential loss of the other party. It was, therefore, a penalty.
Bridge v. Campbell Discount Co. Ltd. (1962)
In this case a customer bought a car under a hire purchase agreement. He paid the initial and first payments and then cancelled the agreement. The company tried to recover the sums specified in the contract for canceling the agreement, but the courts held that the sums payable were excessive and constituted a penalty clause. It was, therefore, unenforceable.
6) The pursuer being entitled to reimbursement of the defender’s charges, decree as craved should be granted with expenses. The Claimant also claims interest at a rate of 8%, from the date of settlement to 20 November 2006 of £5.87. The claimant further claims interest at the rate of 8% APR up to the date of judgment or earlier payment, at a daily rate of £0.17 per day.
7) The pursuer has demonstrated to the defendant the reasons he is requesting a refund of all penalty charges in letters dated 17 October 2006, 02 November 2006 , 10 November 2006 and 17 November 2006. (these letters and a copy of the agreement are attached for you perusal). all correspondence from defendant is also attached for perusal. 8) ZZZZZZZZZZZ calculated the Early Settlement Interest Penalty Charge under the Rule of 78. The FSA recommended that all companies refrain from using this Rule with effect from May 2005. The FSA themselves viewed the Rule of 78 to be unfair to consumers. From the FSA website Early repayment charges (Early Settlement Interest Penalty Charge)
To use a method called the 'Rule of 78' to calculate a consumer's early repayment charge.
“We viewed this as unfair because it could result in the consumer paying a charge much higher than would reasonably compensate the firm for charges lost through early repayment.”
This charge represents an unfair penalty charge in terms of the Unfair Terms in Consumer Contracts Regulations 1999 (SI. 1999/2083) (the ‘UTCC’).
The regulations that applied to ERC's for regulated loans, ie those under 25,000, changed in May 2005. After this date, lenders have only been allowed to charge 1 month's interest as an ERC.
Summary of Claim
Unlawful Early Settlement Interest Penalty Charge £750.00
Interest on above from 16/10/06 to 21/11/06 £ 5.87
Court Fees £ 39.00
Juditial Interest @ 8%APR - Days @ £0.17 / Day Total of Claim £794.87
Hello
I am very impressed with your claim details - are you a lawyer!?
Can you tell me the process involved in trying to claim back some interest that you paid to FirstPlus under the unfair and archaic Rule 78? We all can't be legal geniuses like yourself you see.
Rule 78 unfair? could we claim on this alone?
a borrower should have paid at any stage of the repayment period of a fixed-rate loan they had taken out. While not unusual on credit agreements, it remained a mystery to many consumers.
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Re: Rule 78 unfair? could we claim on this alone?
Originally Posted by reidnet
