THE OFFICE of Fair Trading will make legal history this week when it starts a High Court action against a subsidiary of Abbey National over its interest charges on hire purchase agreements.
The OFT is suing First National Bank, which was acquired by Abbey National four years ago, over a "standard contractual term" the firm uses in HP agreements used by customers to buy consumer items such as washing machines and fridges.
The OFT wants the bank to change a clause which allows it to keep charging interest to customers who have already gone to court to show they cannot keep up payments. Use of the clause can mean debts continue to grow even after a court has judged them to be unaffordable.
It is the first time the OFT has gone to court under legislation introduced in 1995 to enable the regulator to negotiate with companies over consumer contracts that it regards as unfair.
First National has refused the OFT's request to change its particular contract terms, and is determined to fight the OFT in court.
A spokeswoman for the OFT said on Friday: "This is the first time we have ever gone to court on this legislation. This is a big deal for us."
The legislation concerned is the Unfair Terms in Consumer Contracts Re
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