contractual interest - are banks paying it?

[mcfadwmc]

I've been thinkin about this for the last couple of weeks.

 

are banks paying out on the contractual rate?

or are they offering to pay claims at 8%?

 

i've looked through loads of posts but can't find any that say they paid out at the higher rate claimed

 

i've got two going at court stage now which are both for contractual so i wanna know whether i should hold out for the full amount or take an offer that would equate to charges plus 8%

 

plus could we have somethin in the litigation concluded section that reflects this

[superam]

I'm thinking of claiming 8% at refund stage, authorized rate at LBA stage and unathorized at court stage, gives them the option to settle earlier and cheaper and i will advise them in every letter of my intensions. Any thoughts on that please?

[Mindzai]

What do you mean by 'refund stage'?

 

You can't claim the 8% until you get to filing your claim, and you can't just pull a figure out of the air if you're claiming contractual interest. By definition, it has to be in the contract, ie it has to be one of your bank's own rates. So 8% at the start is not a good idea imo.

[zootscoot]

are banks paying out on the contractual rate?

or are they offering to pay claims at 8%?

 

 

I think you are confusing things here. You claim for the contractual rate where charges have been added to a loan or overdraft and you pay interest on these charges. You claim the contractual rate as this represents your true loss incurred by the bank's actions and thus forms part of the amount claimed so should be added at prelim letter time.

 

In addition you can claim the statutory 8% when you file your claim. Its not a matter of either or.

[lucid]

I think you are confusing things here. You claim for the contractual rate where charges have been added to a loan or overdraft and you pay interest on these charges. You claim the contractual rate as this represents your true loss incurred by the bank's actions and thus forms part of the amount claimed so should be added at prelim letter time.

 

In addition you can claim the statutory 8% when you file your claim. Its not a matter of either or.

In the case of charging interest on all charges it has been made clear by Bankfodder that you cannot claim both contracutal and statuory interest - it has to be one or the other. You are able to word your claim so that in the event that contractual interest isn't awarded, then the alternative can be to revert to paying the 8% statuory interest.

 

Lucid

[Mindzai]

I think you are confusing things here. You claim for the contractual rate where charges have been added to a loan or overdraft and you pay interest on these charges. You claim the contractual rate as this represents your true loss incurred by the bank's actions and thus forms part of the amount claimed so should be added at prelim letter time.

 

In addition you can claim the statutory 8% when you file your claim. Its not a matter of either or.

 

I think there is also some confusion over charging the bank contractual interest for having your money (as they would have done if you had had theirs) and getting back the contractual interest the bank has charged you. As far as I'm aware these are two separate issues.

 

I'd appreciate your input on the concept of charging the banks contractual interest as per BankFodder's threads Zoot as you seem to know your stuff about contract law - is there legal basis for doing so? Are there any perticular legal arguments we could use? Any other thoughts on the idea from a contract law persepective?

[pelham9]

Before litigation you can claim 1)unfair charges 2) unfair interest on those charges. 2) is difficult to arrive at but Vamps spread sheet gives a good underestimate. Note that you cannot claim for interest you have not payed and the interest you see in statements IS charged at the contractual rate - the banks do that.

 

After your court case has been started you are entitled to claim interest in addition on both 1) an 2) for being deprived of the use of these unfair charges At present this is at a reasonable rate of 8% simple. Up to recently this has been the CAG position.

 

Some members however think that the statutory rate should be replaced by the contractual rate as we should be able to charge the banks at the same rate as they charge us- fair is fair. The contractual rate spreadsheets attempt to do this. As far as I know the method that these spreadsheets use has not been published and I for one would like to know because it needs checking out.

[Mindzai]

"As far as I know the method that these spreadsheets use has not been published and I for one would like to know because it needs checking out."

 

I've dicussed the methods used in the spreadsheet but not all in one place. The spreadsheet calculates interest with an acceptable level of accuracy. If you'd like to check it out for yourself rather than taking my word for it (probably wise ) you can download it from my sig, or if you have any specific questions feel free to ask me.

[zootscoot]

I'd appreciate your input on the concept of charging the banks contractual interest as per BankFodder's threads Zoot as you seem to know your stuff about contract law - is there legal basis for doing so? Are there any perticular legal arguments we could use? Any other thoughts on the idea from a contract law persepective?

 

BF proposes that you can charge the contractual rate of interest in lieu of the statutory amount by way of an implied term into the contract. Generally the courts are reluctant to imply a term into a contract with the general ideology of freedom of contract prevails. Ie it is upto the parties to agree the terms of a contract it is not the role of the courts to write the contractual terms for the parties. However, the courts will in limited circumstances imply a term into the contract, there are two main ways which they can do so:

 

1. Imply a term as a matter of fact

 

2.Imply a term as a matter of law

 

1. Imply a term in fact

 

A two legal tests are applied to decide if a term is implied in fact they derive from the cases of Shirlaw v Southern Foundries and The Moorcock.

 

1 The business efficacy test

 

The courts will imply a term only where it is necessary to give the contract business efficacy. Ie if the contract makes business sense without the term then no term will be implied. It is thus very difficult to imply a term in this way.

 

2.The officious bystander test

 

The court considers what the response would be by both parties had a person suggested the term at the time of the contract. To imply a term in this way it must be obvious that the response from both parties would be a hearty 'oh of course'. Again this is likely to fail, whilst we would all agree to the term it is not obvious that the banks would also agree.

 

Terms implied in law Liverpool CC v Irwin

 

Terms implied as a matter of law require a contract of a defined type where the law generally offers protection to one of the parties eg Landlord/Tenant, business/consumer - thus this should apply to the banks/consumers (Probaly not to bank/ business account)

 

Where there is such a contract of a defined type the propesed term will only be implied where the term is reasonable. (Wilson v Best Travel)

 

So ultimately it depends on whether a judge deems it reasonable for us to charge the contractual rate of interest. The fact that Parliament provided a statutory rate of interest may also have a bearing on whether it is reasonable. Judges can not override statute, although the statutory rateis not mandatory claimants are given the choice as to claim it or not.

 

 

Possible express term

 

It may also be worth checking the precise wording of your terms and conditions.

If they simply refer to interest is payable at xxx%. Then you can claim under an express term of the contract. If, however, t & c state iinterest is payable by the debtor (and the debtor is defined as the account holder) then you could not do this. Similarly if it states interest is payable to XXX bank or relate specifically to an overdraft facility.

 

Hope this helps

 

Zoot

[Glenn UK]

Zoot

 

would it be fair to say that the primary purpose of sec 69 is to provide a rate of interest in contracual disputes where no interest rate is availalbe within the contract?

 

I understand this to mean for example that if you sue a shop for supplying faulty goods or similar, you could ask for and the court could award Sec 69 interest at the stat. rate?

 

Its also worth pointing out that the original poster has missed a lot of info, the proposal to claim contractual interest in place of Sec 69 is a new idea and hasnt been tested in court.

 

Its probably also worth pointing out that there have been no cases of a bank setting foot inside a court and only judgements by default or settlements pre hearing.

 

I am not certain in the cases where judgement has been arrived at if the court awarded sec 69 interest.

 

Oh finally when a bank settles before court they only pay out what they have to, so i doubt they have yet settled any claims based on contractual interest I would be glad to hear if there are claims being settled with interest.

 

JMHO

 

Glenn

[Mindzai]

Great info Zoot, thanks for that.

 

Oh finally when a bank settles before court they only pay out what they have to, so i doubt they have yet settled any claims based on contractual interest I would be glad to hear if there are claims being settled with interest.

 

True, but if they are going to settle for the full amount (which we know they will) that will have to include contractual interest. I know I'm not going to accept a partial offer, whether they agree with it being partial or not. Essentially if they want to argue the point they will have to take me to court to do so.

 

Hopefully we'll start seeing some results from this method before too long though so we know where we stand.

[Glenn UK]

Great info Zoot, thanks for that.

 

 

 

True, but if they are going to settle for the full amount (which we know they will) that will have to include contractual interest. I know I'm not going to accept a partial offer, whether they agree with it being partial or not. Essentially if they want to argue the point they will have to take me to court to do so.

 

Hopefully we'll start seeing some results from this method before too long though so we know where we stand.

 

With all due respect you dont know, you are presuming.

 

They dont have to settle at all, the fact they are is becuase the balance sheet suggests its in their interest.

 

If the balance sheet changes then they may well change their view. It is likley to happen the only question in my mind is when.

 

I wish you luck, but dont treat the enemy as an idiot, they are not.

 

Proceeidn gon the basis that the bank wont go to court is naive, you should prepare on the basis they will got to court then if it happens you will be able to deal with it.

 

JMHO

 

GLenn

[Mindzai]

With all due respect you dont know, you are presuming.

 

They dont have to settle at all, the fact they are is becuase the balance sheet suggests its in their interest.

 

If the balance sheet changes then they may well change their view. It is likley to happen the only question in my mind is when.

 

I wish you luck, but dont treat the enemy as an idiot, they are not.

 

Proceeidn gon the basis that the bank wont go to court is naive, you should prepare on the basis they will got to court then if it happens you will be able to deal with it.

 

JMHO

 

GLenn

 

You understandably misunderstood me, I meant if they are going to settle, we know they will settle for the full amount. I don't mean, 'we can be certain they'll settle', I mean, 'if they settle, we can be certain we'll get the full amount'. (OK they may try not to settle for the full amount inititally, but if their intention is to avoid court and settle they will eventually settle for the full sum).

[Glenn UK]

in that case i appologise its getting hot and ive just finished working and need to get up early for more work.

 

Sorry about the misunderstanding.

 

Glenn

[Mindzai]

No problem, I didn't phrase it very well

[pelham9]

Mindzai.

 

What is needed is a brief statement from you showing the principles and thinking behind your spreadsheet. I do not see that people can go to court and argue that any spreadsheet is correctly set up unless they know these.

 

I have read all the posts I can find on your spreadsheet and I cannot make up you mind as to what you are doing. One clear post could settle the matter.

 

Vamp's first spreadsheet worked out the statutory (8% simple) interest on the charges only and was used to arrive at the post litigation settlement figure for interest. There was no attempt to to quantify the amount of unfair interest which could go into a prelitigation claim.

 

The improved Vamps spreadsheet attempts to quantify the unfair interest charges which can be part of a prelitigation claim. The method is a great improvement and has the advantage that relatively few entries are necessary but as it does not take into consideration that interest is charged on a daily basis and estimates of the balance to which interest is applied have to be made in many months. I have made a plea that it should be modified again to ensure greater accuracy. I think I am right in saying that the unfair charges and unfair interest charges are fed into the first spreadsheet method in order to work out the post liigation settlement interest at the statutory rate.(8% simple)

 

So what are you doing?

 

As far as I can see there are two possibilities,

 

1 You follow Vamps improved method to work out the unfair interest charges You then work out the settlement interest by applying Vamps first method but instead of 8% simple using the compounded rate of interest . Using daily compound rates to do this is valid. This will give the nearly highest possible total settlement and could only be bettered if the probable underestimate of unfair interest in Vamps improved method could be eliminated. But will the courts buy contractual rates?

 

2. You make no attempt to work out the unfair interest charges but simply apply a daily compound contractual rate to the charges only, up to the day of settlement . My impression is that is what you are doing. You will of course get a higher interest amount because compounding at a much higher rate than 8% simple will swamp the relatively small effect of the unfair interest charges left out. However 1) will give a higher sum and has the advantage of that it splits the interest into pre and post litigation amounts. If you can persuade the courts to go down the contractual interest rate route it would surely be better to use 1) . The main advantage of 2) is that you do not have to enter interest charges into the spradshheet. If the courts reject the contractual interest approach transposing to 8% simple could reduce the claim to Vamp's first method as I feel that it will be difficult to intoroduce Vamp' s improved method at that stage. I think it will cause muddle.

 

If 1) is what you are doing I am with you otherwise not.

[Mindzai]

So what are you doing?

 

As far as I can see there are two possibilities,

 

1 You follow Vamps improved method to work out the unfair interest charges You then work out the settlement interest by applying Vamps first method but instead of 8% simple using the compounded rate of interest . Using daily compound rates to do this is valid. This will give the nearly highest possible total settlement and could only be bettered if the probable underestimate of unfair interest in Vamps improved method could be eliminated. But will the courts buy contractual rates?

 

That's correct. You will see if you download it that there is a section which shows an estimation of all of the interest paid on penalties in just the same way as Vamps.

 

Whether the courts buy contractual rates is an entirely sperate issue though. I'm providing the spreadsheet as a tool which was missing from the set of spreadsheets already available, ie one that works out compound interest. I saw various people advised to 'just change the 8% in Vamps sheet to your banks APR'. This is just problematic though. You can't calculate an accurate daily rate where compounding is an issue by doing that for one thing (in the available sheets), and even if you could it doesn't then compound the interest anyway. I needed to work out my own, and as I'm a data analyst and therefore work with spreadsheets every day anyway, it seemed logical to use one here. Once completed, people expressed interest in a spreadsheet that compounds so I uploaded it after makeing some modifications to make it generic. I'm afraid that is where my support for compounding interest as an idea stops. I'm happy to answer any questions etc about the workings of the spreadsheet etc, but I'm just not qualified to answer questions like 'will the courts buy contractual rates'. That's up to the individual to decide, and when they do if they wan't a tool for calculating this to a reasonable degree of accuracy, it's there if they choose to use it. My intention isnt to encourage people to claim contractual interest, it's to provide a tool for those who have already decided.

 

Your point about making it more accurate is valid, but imho the spreadsheets on the site now are pretty much at the optimum ratio of ease of use to accuracy. Improving one now would have a negative impact on the other. Of course that's no reason not to provide one to those who ARE happy with the extra work involved in data entry.

[pelham9]

Mindzai

 

Thanks very much for that and amount of time and effort that you have clearly given this.

 

I am sure that it is just that banks should pay contactual compound interest as that is what they charge their customers. We shall have to see if the courts agree. By the way if their rates are extortionate it follows that asking for the same rates is also extortion and to say that, is not an argument against using their contractual rates - quite the contrary

[Glenn UK]

Mindzai

 

I know we have expressed different views or at least different angles maybe on this issue, but pelham does make a very valid point, you are to be thanked and congratulated for pointing some of the 'shortcomings' of the existing sheets and providing what you have.

 

and before someone points out that Vamps sheets also took a lot of work, i acknowledge that too, and dont mean to imply that they have no place. They are in essence different from that provided by Mindzai thats all i was meaning.

 

Anyway cheers

 

Glenn

[lucid]

Thanks very much for that and amount of time and effort that you have clearly given this.

pelham does make a very valid point, you are to be thanked and congratulated for pointing some of the 'shortcomings' of the existing sheets and providing what you have.

Thank you for both of your comments. Obviously I know the amount of work Mindzai put into the spreadhseet and it's really nice to see some postive feedback about it.

 

You're exactly right in what you say Glenn. Mindzai's sheet was never meant to replace Vampiress', and the reason he made it orignally was to use for our claim. He felt it would be a useful tool to provide for people as at the time there was much confusion surrounding the use of Vampiress' spreadhseet to compound the interest - which you can't do. It was never intended to try and push people in the direction of claiming contractual interest, but we thought that it could help people who had chosen to go that route anyway and prevent them from making the mistake of claiming 'contractual' interest but actually calculating 'simple' interest, achieved by changing the rate in Vampiress' sheet.

 

Good luck with both of your claims. Lucid

[Mindzai]

Glen and pelham - thanks for your comments. Hopefully someone will find the spreadsheet useful!

[Glenn UK]

Glen and pelham - thanks for your comments. Hopefully someone will find the spreadsheet useful!

 

As a point for info i have found the spreadsheet very useful in all but one respect.

 

Its put my claim potentialy in multi track and i dont really want to play in the big boys court!!!

 

But thats another storey.

 

Glenn

[Mindzai]

lol well hopefully it won't get there. I saw someone post today that the bank settled for £16k so it's not just those of us with small to medium claims that are getting their money back. Plus in one way it works in your favour, in that they will be less likely to want to pursue a high-profile case, especially in a court where precident could be set.

[Glenn UK]

Mindzai

 

I think i agree and dont agree at the same time.

 

If they do decide to defend a case it might as well be one where their money plays the biggest part i.e. fast or multitrack court.

 

i cant afford any solicitor, let alone a solicitor and barrister, but the bank on the other hand can afford whichever team they fancy.

 

So i guess if they choose to fight why not go for the top?

 

But on the other hand there is a school of thought that suggests they would be mad to defend in case they loose.

 

Out of interest which bank was the 16k paid by?

 

Glenn