Mis-Sold Sub-Prime Secured Loan>? - Claim advice required.

[MrZ]

I will try to be thorough but brief. After finding this site and the wealth of information available, I suggested to a friend that they should SAR their loan company to determine whether or not they had a valid claim for PPI. The SAR was made and in a very quick turnaround the reply was received. I was expecting to see a typical PPI mis-selling, but I was not expecting to see what I believe amounts to the mis-sale of the entire loan.

 

In a nutshell the income/expenditure used by the loan company was significantly mis-stated by the the loan company's underwriting and means testing departments. The following information is totally derived from details within the SAR received.

 

The application completed by my friend shows a gross annual income of £38,000.00

The internal underwriting/means testing shows a gross annual income of £51,000.00

Thats an increase of £13,000!!!

 

There are no copies of bank statements or payslips that you would expect to see in a SAR reply. The only information that relates to income/expenditure in the SAR are the internal underwriting/means testing worksheets. These worksheets have the figures for the annual and monthly income and expenditures and tick boxes that they have been verified.

 

The sheets show a monthly gross income of roughly £4,200.00. In reality the payslips for that time period show a gross monthly of £3000.00. The lender has exaggerated the monthly income by £1,200.00 a month!

 

The requested loan amount was £10,000.00

PPI was added to the tune of £2,500.00

Administration fee of £1000.00

For a total loan of £13,500.00

 

However on the underwriting/means testing worksheets the amount used to determine the Loan to Value against the property was only the £10,000.00, thereby suggesting a lower LTV on the underwriting sheet.

 

The loan based on dodgey income/expenditure was approved and monthly payments set at roughly £300.00 each month at an annual interest rate of 27%.

 

Needless to say based on ACTUAL income and expenditure this was completely and totally unaffordable, and arrears occurred almost immediately...the first full payment was made and then a struggle from that point forward. From that point monthly arrears fees (£50.00 a month) were added, and to date those fees alone total roughly £3000.00 including the interest.

 

Its important to note that the only reason the loan was taken out was to clear mortgage arrears in the face of repossession. This was a desperate attempt by my friend to get out of a financial mess due to circumstances beyond my friends own control.

 

I certainly think that this lender recognised this and took advantage of the situation and placed my friend into a loan with zero chance of repayment. There was equity in the property at the time, and so its reasonable to to suspect that the lender felt they could force sale if need be to recover the money.

 

Finally I want to add that this particular lender is no longer lending, and is in quite a desperate situation now, due to exactly this type of practice. I hesitate to give too much info regarding the lender due to the sensitivity of this potential claim.

 

I understand that if a claim were made and a judgment for my friend were to be awarded, even if just for the PPI, there is zero chance of my friend actually seeing any cash compensation, due to the fact that the lender basically has no liquid assets to pay out any claims or creditors.

 

My friend has since gotten a grip on the financial hardships once faced, but has never been able to make the full payment as per the agreement. As a result for the last 2 years regular reduced payments have been made. Only recently has the lender frozen interest, which does at least stop the bleeding, but to date the total arrears is being shown as £26,000.00.

 

Arrears of £26,000.00 on an initial loan application of £10,000.00!!!

 

My friend really needs to get out from underneath this. At the current rate of repayment, payments will need to be made for the next 14 years on what was supposed to be a 10 year loan taken out 7 years ago. To date my friend has paid roughly £8500.00 toward the loan.

 

My initial thoughts are that the entire loan was completely mis-sold. My friend has paid £8500.00 toward the £10,000.00 advanced. Considering the above, I suggested and my friend agreed, that an appropriate resolution would be to consider the debt completely settled.

 

If a potential claim can be made for mis-selling, my friend would be willing to forego claiming any compensation, provided the lender agrees that the loan is fully satisfied, removes the charge on the property and updates the CRA's to remove any negative markers and show the debt as completly satisfied/paid. Otherwise my friend is fully prepared to see it out in court.

 

I would really appreciate any other opinions on this matter.

 

Thanks in advance!

[pop_gun]

your friend provided dodgy payslips and lied about their expenditure to obtain a loan, which

was secured on the property the loan was intended for.

 

unless you... oops, your friend can come to some arrangement with the loan company, i think

you'll have a devil of a time proving the entire loan was missold to you... your friend.

Edited May 2, 2011 by pop_gun

[MrZ]

Thats definitely not the case re the payslips. In the SAR there are no payslips at all. The payslips I am referring to are the orginal hard copies, as there is in nothing in the SAR regarding income. Not only that, on the original application for the loan with my friends signature, it clearly shows the income being listed as £38,000.00,

 

I found it very odd that there is nothing in the SAR relating to income verification, especially considering there is a £13,000.00 difference from what was shown on the application versus what used in the underwriting/means testing. I asked my friend whether payslips were ever sent or requested by the lender when the loan was taken out. She said she was certain she sent payslips and copies of passports (there are no copies of the passport in the SAR either). Email archives have been requested from the employer's IT department as most of the correspondence was apparently done via email, and all these emails have been archived.

 

I appreciate the objective opinion, but having sight of the SAR which contains the application and other information, there is no doubt in my mind that my friend provided true and accurate information to the lender, and i personally trust what I am being told as the friend in question would be terrified to "tray anything dodgy".

 

There is also a significant monthly expenditure listed on the application that has been totally unaccounted for in the underwriting/means testing. Going from the information o n the application alone, the means testing would show that my friend would be well outside of the limits of qualifying for the loan.

 

I would expect the lender to provide explanation as to why all of the information clearly shown on the application has such a big discrepancy on the underwriting and means testing worksheets used to approve the loan.

[pop_gun]

i misunderstood your stated position, regarding the income disparity.

if this case is to be won it's going to be fought on the grounds of it's

enforcibility or it's unfair terms.

 

this link provides the legislation i believe covers the additional fees.

the fees are clearly exorbitant.

 

http://www.legislation.gov.uk/uksi/1999/2083/regulation/5/made

 

the following addresses enforcibility of the debt. this can only work as a delaying tactic

as it clearly states they can take your friend to court. your friend's defence will rest on whether

she would've received the same loan at £50,000p.a. as she would have at £38,000p.a.

 

http://www.oft.gov.uk/about-the-oft/legal-powers/legal/cca/unenforceable-credit-agreements

 

from where i'm standing the claimant will argue the loan was for arrears on her property. a loan

that if it hadn't been granted would have cost her her property.

 

i suspect your friend has no equity in her property (though could you please confirm this), so if

this was to go to court and she lost, they couldn't enforce a charging order until there was sufficient equity.

[MrZ]

Thats fine. Perhaps my writing wasnt very clear.

 

There is some equity in the property, but not sure its enough to clear the second charge if it were a forced sale. Basically the market value is 225K, the amount outstanding on the first charge is 175k.

 

I'm reading the info in the links you provided.

 

At the moment my suggested plan of action is to place the account in dispute due to the fact of a CCA request breach. They have not supplied a full statement of account nor have they supplied any docs regarding the PPI charged. I was going to suggest that she create a standing order for a nominal goodwill payment, and wait for them to try to enforce in court. At that time the issues with regards to the enforceability can be taken to the court at the lenders expense. This way she wont have exposure to the cost.

 

As previously mentioned, this particular lender is in a very difficult position financially, and I doubt would be willing to incur the cost for a court action.

[pop_gun]

the bits in bold. am i right in thinking you are talking about charging orders

already on your friend's property? or do you mean something else entirely?

 

p.s. if the claimaint is in dire straits themselves they will push for as much as they

can get away with. a nominal goodwill payment is ok if you're dealing with a financial

institution (e.g. a bank, building society etc). it's not ok, when you're dealing with some two bit outfit,

who'll try and spin the payment into some admission of liability, in court.

 

if you still want to do this. make sure you make the offer to the company directly and put

 

WITHOUT PREJUDICE

 

at the top of the letter. this way the company can't use it against you in court.

[hybrid77]

Even if you can prove the loan was mis-sold, it doesn't get written off ... in most of the cases I've read, both parties are put back into the position they were in before the loan, eg interest gets wrtten off, but not the inital loan amount, that would leave your friend with £1,500 outstanding. If you've already proved mis-selling and unfair relationship (forget the bit in the CCA about it being for the creditor to prove it's fair, it's certainly not happening that way in our case), you can then look at the bigger picture and find indirect costs that the loan caused to bring that balance down (we have bank charges for bounced direct debits, solicitors costs for mortgage and council tax arrears etc).

At that time the issues with regards to the enforceabilty can be taken to the court at the lenders expense. This way she wont have exposure to the cost.

IMHO this wouldn't be small claims. As a defendant in fast track, you ARE subject to costs if you lose. There seems to be very little help out there with unfair relationships, because it's not really been tested in court much and each case is very individual. We've found solicitors run a mile (even further when you mention fraud as well). If I'd known 2 years ago (when we stopped making payments) what I know now, I'd be making £1 token payments

[MrZ]

The first charge is the mortgage on her property. The second charge is for the secured loan in question, which incidentally the lender refers to as a second mortgage. The lender also includes information from the OFT in arrears correspondence regarding "Mortgage Arrears".

 

I think it's okay to say that this particular lender is not a high street bank, and is currently in Administration.

 

As far as liability, there have been regular payments made for the last year or so. They now claim that the regular monthly payment is £790.00, which is a far cry from the £320 in the agreement. This is according to them because of the increase in interest and increased balance due.

 

Hi Hybrid77,

 

When I mentioned going to court at the lenders expense, I was referring to them initiating a possession claim. Would that not be the course of action they would take if they were unsatisfied with the payment being made and the arrears?

 

I was also informed that the lender apparently proposed a solution 2 years ago. The lender sent a debt counsellor to discuss options. After the counsellors visit, the lender proposed to write off the interest accrued to date, set payments to £150 for a period of 5 years to clear the debt. My friend agreed and immediately began making the reduced payment. days later she was informed that the "underwriters" would not accept.

 

I have no idea who the underwriters were, as it appears from the SAR that the original underwriting was done in house. Nothing of the counsellers visit or the findings and subsequent offer is to be found in the SAR. There is charge for the visit though. The proposal was made by the lender over the phone. There are also no records of any phone conversations of any sort in the SAR.

 

The complete SAR amounts to about 15 pages and includes the Agreement, terms, application, underwriting sheet, means test worksheet, and security checklist. That's it.