Help! Solicitors Letter Re: Erc Received

[stuflo]

We act for Endeavour Personal Finance Limited and our client has asked that we respond to your letter to them of 3rd November.

On 15th December 2005 you obtained a loan form our client of £45,000.00. That loan was secured by way of a second charge over your property and the terms of the loan were contained in the Unregulated Credit Agreement of that date. A copy of the Agreement signed by you is enclosed.

It was envisaged that the loan would be repaid over a period of twenty-five years at a monthly instalment.

Pursuant to paragraph 4 of the Terms and Conditions to be found on the reverse side of the Agreement you were given the right to repay the loan early on the terms set out. It may assist if we refer to the relevant part that reads:-

“You may settle this Agreement early by paying the balance outstanding of the Total Loan Amount and any interest outstanding at the date of payment together with any Unpaid Monthly Insurance, reasonable costs, charges and expenses, debited to your account and an early settlement charge (“ERC”) calculated as follows. If repayment is made three years or less after the date of this Agreement the ERC will be equivalent to six months interest on the balance of the Total Loan Amount then repaid at the rate of interest then payable. If repayment is made more than three years after the date of this Agreement the ERC will be calculated on the above basis but reduced by one month’s interest for each year or part of a year that the Agreement has continued in force in excess of three years. If repayment is made more than eight years after the date of Agreement no ERC will be payable”

In June 2006, and six months after you had taken our the loan, you decided to exercise your contractual right to repay the loan. The ERC calculated in accordance with paragraph 4 of the Agreement was £1,941.79.

We now turn to the contents of your letter of 3rd November. Can we firstly address your complaint that you were deceived into paying the ERC and that the nature of this charge was somehow concealed from you. This is of course not correct as the terms relating to the early repayment of the loan are clearly set out in the Agreement. You would not have signed the Agreement, and taken the loan from our client, unless you had agreed those terms.

Furthermore, before repaying your account you were provided with a redemption statement and which recorded the amount of the proposed ERC. You then exercised your right to repay the account and with full knowledge of the amount that was due.

It is not correct to say that the ERC is “unlawful at Common Law, Statute and recent consumer regulations”. The Common Law to which you refer does not give the debrot any right to a rebate or charges on early settlement. Nevertheless, the Agreement of our client to which we have referred contains a contractual right to make early settlement and for a rebate of the charges that would otherwise be payable under the Agreement on the terms set out in paragraph 4 to which we have referred. Your letter proceeds on the basis of a misconception that the ERC represents a charge levied as a result of your breach of the Agreement. This is not the case as you did not breach the Agreement, but simply exercised your right to make an early repayment of the loan and on the terms as agreed by you.

For the avoidance of doubt it is not accepted that the amount charged is in any way unreasonable of unfair. The Regulations to which you refer say that a contractual term shall be regarded as unfair “if, contrary to the requirements of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer”. This is not the case here as similar terms are commonly to be found in consumer loan agreements of this nature and the early repayment provisions are written in plain intelligible language and are readily understandable. The ERC strikes a fair balance between the potential wish of the debtor to repay the debt early and the position of our client that has incurred upfront costs in making the loan and which in those circumstances, is denied the opportunity of recovering those costs by way of the interest that would otherwise have been paid over the agreed term.

We trust that we have now answered this matter to your satisfaction. If not, then our client is a member of the Finance Industry Standards Association and ultimately, you have the right to refer your complaint to them as an independent adjudicator in nay dispute between a member and its customers. Further details in this regard can be made available to you if required.

Can anyone help – are they right about this – I would be prepared to go to issue on this if I thought I had a chance of success – Can any moderators take a look – Zoot – can you have a read and give me your advice please.

Many thanks

[kendraflo]

Can any moderators give me some advice here please

[gizmo111]

Standard fob off - I sent this to Mortgage Express after receiving similar argument back - amend to suit your personal circumstances.

 

Thank you for your letter of 04 October regarding Early Repayment Charge of £5020.03, which was made on the above account.

I refer to the following statements in your letter

As quoted from the office of fair trading ' Terms in consumer contracts which set the price or define the product or service being supplied are 'core terms' of the contract and are exempt from the test of fairness as long as they meet the plain language requirement' I've enclosed the copy of the special conditions and would refer you to point 11 which I have highlighted. This section of the contract details our tariff of fees and in signing this document you’ve agreed to these charges.

Your terms and conditions at the point of redemption clearly state that there would be an Early Repayment Charge applicable.

It is my belief that the Early Repayment Charge is in fact a penalty for breach of contract rather than as suggested by yourself a charge for the supply of a service or product in that we terminated the mortgage contract before the contractually agreed period of 25 years.

 

This term of the contract was clearly stated in the written mortgage offer signed by myself and Mr xxxxxxx The terms of which were incorporated by reference into the mortgage deed which was not only signed by us but also witnessed. There is clearly no room for doubt that such a clause existed in the contract. Similarly, there is no question that we in fact redeemed the mortgage on the 30/04/2004 as evidenced by our final redemption statement. This date is clearly well before the contractually agreed date of 25/06/2028 and thus represents a clear breach of the contract.

My letter to you dated 18th September does in fact draw your attention to other statements from the Office of Fair Trading, and also relevant statute and common law. May I suggest that you familiarise yourself with the legal principles outlined in that letter so as to be sure that you understand the legal basis for my request for repayment of the Early Redemption Charge, of £5020.03.

Since paying the fee I now understand that such fees are unlawful and unenforceable as outlined in our previous letter. We would draw your attention to the terms of the contract which you agreed to at the time that we opened our account. It is an implied term of that contract that you would conduct yourselves lawfully and in a manner which complies with UK law.

 

I am frankly shocked that you have operated our account in this way as we had always reposed confidence in your integrity and expertise as our fiduciary. We require repayment in full of this money. If you do not comply fully within 14 days then we shall initiate court proceedings against you for the full amount, plus interest, plus costs and without further notice.

 

Yours faithfully,

[stuflo]

Can anyone help with this letter? Do I have any claim in relation to a secured Loan? Could a moderator take a look please. Thanks:rolleyes:

[zootscoot]

Yes you have a claim. It is not a regulated agreement and therefore a simple ERC. Their arguments are weak. Simply the no breach and you agreed to the terms neither carry any weight. Try this letter:

 

 

Dear xxxx

 

Thank you for your letter dated xxx regarding my request for the refund of the ERC which I paid on redeeming my mortgage.

 

The charge you have levied in the form of an early redemption fee (substitute any other name which your mortgage provider has used) represents a charge in relation to a breach of contract on my/our part in that I/we terminated the mortgage contract before the contractually agreed period of XX years.

 

This term of the contract was clearly stated in the written mortgage offer signed by myself (and XXX?). The terms of which were incorporated by reference into the mortgage deed which was not only signed by us but also witnessed. There is clearly no room for doubt that such a clause existed in the contract. Similarly, there is no question that we in fact redeemed the mortgage on the xx/xx/xxxx as evidenced by our final redemption statement. This date is clearly well before the contractually agreed date of xx/xx/xxxx and thus represents a clear breach of the contract. Furthermore in the case of Campbell Discount v Bridge the House of Lords held that a contractual term giving rise to an option to termiante early did not prevent a finding of breach of contract.

 

The fact I agreed to the clause at the time the contract was entered is completely irrelevant. In all the relevant case law there has been no argument that the relevant clause was in fact agreed to.

 

For these reasons, and the fact that you have not provided me with the details of how you have estimated your 'liquidated damages', I believe that the ERC levied was in fact a penalty and I shall be isssuing proceedings against you forthwith should you not comply with my initial request.

 

However, I would like to give you the opportunity to settle amicably without the need to take the time of the courts in accordance with my duty under the Overriding Objectives of the Civil Procedure Rules. This option will of course save yourselves the time, trouble and costs of defending the claim. If, however, you do not comply with my request I will issue proceedings on xx/xx/xx.

 

Yours faithfully

[stuflo]

Thanks very much zoot, I will send the letter you suggested. I will keep you updated as to how I get on.

[stuflo]

Zoot – sent the letter you suggested – have received the following reply from Endevour Personal Finances’ Solicitors

“We thank you for your letter of 22nd November

We note that you now accept that Clause 4 of the Terms & Conditions of the Agreement was clearly stated and not, as alleged in your letter of 3rd November, that the early settlement charge was somehow concealed from you and that you were deceived into paying the same. You were aware that the charge would apply when you entered into the Agreement and when you elected to exercise the option of early settlement.

The case of Bridge v Campbell Discount Co Ltd is not authority for the proposition to which you refer. That case concerned a hire-purchase Agreement for a care and which contained a provision that the hirer could terminate the Agreement early by giving notice of termination in accordance with the Agreement. In that event, the Agreement provided that the hirer was to pay to the owner “by way of agreed compensation for depreciation of the vehicle such further sum as ay be necessary to make the rentals paid and payable hereunder equal to two thirds of the hire purchase price”.

It was held by the Court of Appeal that the question of whether the sum claimed was a penalty did not arise because it was claimed on the exercise of the hirer’s options under the Agreement and not in respect of any breach of the Agreement. In other words, that the hirer having elected to exercise the option could not maintain that the sum payable as a consequence was a penalty.

The case then proceeded to the House of Lords. Although by a majority they reversed the decision of the Court of Appeal, they did so on different grounds. They held that there was no admission that the hirer had exercised the option to terminate and they therefore proceeded to decide the case on basis that it was one where the hirer had declared his ability to go on with the hiring and that the owners of the vehicle, having then resumed possession of the car, had asserted their contractual rights under the clause to which we have referred above.

The distinction is very important because, accordingly, the decision is not authority for the proposition that the exercise of a contractual provision of an option allowing early termination of an agreement can rank as a penalty. The opinions of the Judges in the Houses of Lords were equally divided in that regard, and two held that had they decided the case on the same basis as the Court of Appeal, namely that the hirer had elected to exercise the option, then they would have allowed the recovery of the sum stipulated. As a result the decision of the court of Appeal in relation to the exercise of the option, following as it did an earlier decision in Associated Distributors v Hall, was not overruled and still stands.

We believe that we have made the position of our client clear. We are aware of a number of web sites that seeks to encourage claims of this nature on the premise that the lender will capitulate rather than incur the costs of Court proceedings. We believe that it would be a mistake for you to proceed on that basis, and if you disagree with our view, then you may wish to consider obtaining your own independent legal advice before embarking on litigation. If you nevertheless decide to do so then you should bear in mind that the proceedings will be defended.

Yours faithfully

any advice?

[stuflo]

any advice anyone?

[zootscoot]

Hi Stuflo,

Sorry for the delay. Too busy protesting!

 

Try this:

 

 

Dear xxxx

 

Thank you for your letter dated xx/xx/xxxx regarding my request for the return of the Early Settlement Charge unlawfully taken by you to discharge my mortgage account.

 

Firstly I would just like to clarify the point that I have never asserted that you concealed the charge, it is the unlawful nature of the charge which you have concealed. I am thus not disputing the fact that I was aware of the charge when entering the agreement and I was also aware of the charge when I regrettably had to breach my contract with you and terminate the contract before the contractually agreed period.

 

You state that the, the decision in Bridge v Campbell Discount is not authority for the proposition that the exercise of a contractual provision of an option allowing early termination of an agreement can rank as a penalty, I agree with your interpretation of the case, although, this is not a proposition which I asserted in my letter dated xx/xx/xxxx. In fact I stated:

 

…the case of Campbell Discount v Bridge the House of Lords held that a contractual term giving rise to an option to terminate early did not prevent a finding of breach of contract.

 

Which is also correct and the case was decided on the basis that the hirer had breached his contract rather than exercised an option under clause 6. Although two of their Lordships (Lord Denning and Lord Devlin) went further in their findings, holding that even had the hirer exercised the option, they would still be prepared to strike down clause 9 as a penalty and thus were of the opinion that Associated Distributors, Ltd. v. Hall was wrongly decided. This, as a minority decision, however, I recognise as not being binding. The finding of a breach of contract as oppose to the exercising of an option was based on the fact that to amount to an exercising of an option there had to be intention to exercise the option demonstrated by the hirer.

 

When I terminated my mortgage early it was purely to be free from the burden of the contractual obligation. I was not aware that I was exercising an option to terminate but merely knew that if I did end early I would have to pay a penalty. If I am unaware that I am exercising a right how can it be said that I intended to exercise such a right. (You may want to add here any reasons which forced you to end early in order to strengthen your argument).

 

Furthermore paragraph 4 of the terms and conditions of the mortgage contract is merely a penalty clause disguised as an option to exercise a right. It is my contention the courts would look to the substance of the clause 4 rather than the form. It is thus my assertion that clause 4 is simply a pretence at conferring a right to exercise an option when in essence it is simply a term setting out the consequences of a breach of contract and as such in the absence of a genuine pre-estimate it amounts to a penalty.

 

As such, the clause can thus be seen as ambiguous as there are two possible interpretations of clause. In the event of ambiguity in a written contractual term, the contra proferentem rule requires the court to resolve any ambiguity against the party who drafted the term. In this regard I would also like to draw your attention to the Regulation 7 of the Unfair Terms in Consumer Contracts Regulations 1999:

 

7. - (1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language.

 

(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12.

 

Whilst you are correct in the assertion that the precedent of the Court of Appeal in Bridge v Campbell Discount 1961 was not technically overruled by the House of Lords, the decision in the House of Lords, coupled with the intervening advances in consumer protection law have virtually deprived the precedent of all its force. If this is your only basis of defence, I feel it is only fair to warn you that your chances of success are minimal.

 

Given that you have still been unable to furnish me with a breakdown of how you calculated your genuine pre-estimate of costs in order to satisfy me that your Early Settlement Charge was indeed a lawful liquidated damages clause, I can only assume that this is not the case and indeed that the process of estimating your losses was not in fact carried out. The only conclusion I can therefore reach is that the ESC was an unlawful penalty.

 

It is thus with regret that in the absence of any attempt to settle this issue, I am forced to pursue a claim through the courts for the sums unlawfully taken. It is of course still open for you to settle this dispute by either giving satisfactory evidence demonstrating that the ESC was lawful or returning the sums of money. If you do not positively respond by xx/xx/xxxx I will be issuing a claim in the county court for the full amount of sums unlawfully taken, plus costs and interests.

 

I look forward to hearing from you.

 

Yours faithfully

 

xxxxx

 

 

[CrispDust]

zoot you're a gem! and a wiz with the gobbldy gook!

[stuflo]

Thanks Zoot

 

Have sent letter off and will send big donation if I get anywhere with this. Fingers Crossed.