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Can Rule of 78 still be used?


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I have a secured FirstPlus loan of £40k, taken out in August 2004. It's 6 years in and despite paying some £27k in payments, their early settlement calculator shows I'll have to pay £38k if I want to clear the loan now. I believe that's using the rule of 78 to front load the first 10 years worth of interest, but from what I've read it appears they aren't allowed to do that anymore.

 

The loan isn't regulated by the CCA 1974, but in clause 6 it states that I may settle the agreement in full at any time in accordance with the CCA 1974.

 

So, does anyone know if they are legally allowed to use the rule of 78 and front load interest, or will I only have to repay the outstanding capital?

 

There's a big difference as repaying only the outstanding capital means I'd only need around £29k to clear the loan.

 

Many thanks,

AM

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Thanks Frettful. So if I understand it correctly, the using Rule of 78 is considered unfair, so I assume front-loading of interest would be too. I haven't yet spoken to them for a settlement figure, I wanted the ammo just in case they try and pull a fast one.

 

Did you know they're now calling themselves UK Secured Loans, or at least that's what they call themselves on their customer helpline.

 

Will update this thread with what happens as I'm sure other people will want to know.

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  • 2 months later...

Hi angling man, how did you get on?

omnia praesumuntur legitime facta donec probetur in contrarium

 

 

Please note: I am not a member of the legal profession, all advice given is purely my opinion, if in doubt consult a professional

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Yeah as I am having the same problem with Firstplus. I am seriously considering stopping payments to see if they will take us to court. We owed them about £5700 in 2006 but using Rule 78 they state we stil owe them over £7000! We pay £70 per month now after the sale of our house ther was a deficit of the £5700 which is why payments dropped down to £70 for the remainder fo the term. Still have another 9 years to go. By my estimates we have already paid off £3200 of the £5700 since 2006 when we sold the house.

I really think that theya re seriously breaching the Unfair Terms rules but not sure how to challenge them. We can get legal aid.

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I phoned them and they stated they do not use Rule of 78, so things have obviously changed since they printed the T&C's booklet I have from 2004. I requested an early settlement figure and it seems okay.

 

Regards,

AM

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Sent off another request for an early settlement figure plus a full statement. Aren't they supposed to send you a statement at least once every six months even though it is an unregulated agreement? We have not had a statement for well over a year and that was only because we had requested it.

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