Firstplus - borrowed £50k/repaid £52k 3yrs later

[James31]

Just having a flick about tonight and have seen some snippets of info on this but nothing exact so far, so thought I'd post.

 

I borrowed 50k from Firstplus in May 2004 on a 15 year term, secured against my property. Had to remortgage to cover a tax liability this year but Firstplus declined to issue a deed of postponement so I had to increase my mortgage application in order to repay Firstplus.

 

Their settlement letter arrived:

 

Total amount payable under the agreement: £81,423.01

Less our rebate on early settlement: £29,539.59

Plus admin charge: £150.00

Total amount payable by you to settle@ £52,033.42

 

I was shocked, as this more than I borrowed to begin with in May 2004 and had repaid about £17.5k over the previous 33 months.

 

Called them about it but they would not entertain telling me how the final figure was derived, or reduce it.

 

I would be interested in hearing from anyone who has been in a similar situation and managed to claim back a portion of the settlement fig, or if anyone knows whether or not there is a case to fight for some of that money back.

 

By my crude calculations, I think a more realistic settlement fig would have been about £48k?

 

James

[Rebel1]

James31

 

Reidnet and myself have both taken issue with extortionate interest charged by FirstPlus who have been calculating the interest on loans using the recently defunct Rule of 78. Reidnet won his full settlement without taking them to court. I have sent my claim to the Financial Ombudsman - my circumstances are very similar to yours i.e 50K loan over 24 years, settled early and charged £50,600 approx.

 

Will let you know what happens. Inevitably it will take months for the case to be settled but I think it will be worth it.

 

Look at posts by Reidnet re this very issue.

 

Best of luck with everything

 

Rebel1

[Fashionably Late]

I am just getting ready to go through this with First Plus now. Any advice would be greatly appreciated.

[James31]

I haven't taken this any further but would be interested to see how Rebel1 gets on.

[steven4064]

Total amount payable under the agreement: £81,423.01

Less our rebate on early settlement: £29,539.59

Plus admin charge: £150.00

Total amount payable by you to settle@ £52,033.42

 

I was shocked, as this more than I borrowed to begin with in May 2004 and had repaid about £17.5k over the previous 33 months.

I ran those figures through the OFT's DualCalc program and it comes out at an APR of 14.9% which sounds a bit high for a mortgage but farily reasonable as far as second mortgages go - Picture and Welcome charge nearly 30% APR on a secured loan.

[James31]

30% !!!!! That is criminal. I hope there aren't too many people in that position.

[steven4064]

Unfortunately, there are. "But that's less than we're paying now" (in Geordie accent)

 

For an unsecured loan they charge 62%!!!

[Rebel1]

Hello all

 

Have not visited for a bit, but thought I'd fill you in re FirstPlus.

 

Please, please, please note everyone that if your repayment figure has been calculated using the Rule of 78 (check the back of your agreeement) FirstPlus could be in big trouble. The use of the Rule was outlawed some time ago (I think a couple of years, google to find out). FirstPlus should not being using this formula as it is now illegal.

 

I decided to file my compolaint with the Ombudsman, over 6 months ago now. They have not thrown it out and are looking at the merits of my argument, namely that FirstPlus were fully aware that the Rule of 78 charges the borrower a disproportionate amount of interest and is therefore unfair under contract law.

 

Will keep everyone posted. Please wish me luck. And good luck to all you other 'rebels' out there.

[steven4064]

Hi rebel1

 

Can you post some mor einformation on this - it looks as if it might be useful for others.

[Rebel1]

Hello Steven

 

I will outline my case later this evening - kid commitments at the mo'. However I did find out the date on which the Rule of 78 was outlawed. Any contracts entered into after May 31st 2005 cannot use the Rule of 78 to calculate any redemption figure requested by the borrower.

 

I truly hope this makes it crystal clear to all borrowers who have used FirstPlus and are trying to pay off a loan early. The amount that you pay back should reflect the fact that you have been making payments towards the principal sum and not interest only, therfore you should not have to pay back more than you originally borrowed.

 

Hope this helps some people.

[James31]

I was one year too early - I took out my 50k loan with them in April 2004. I knew I'd pay back some silly amount but after three years of repayments of £550 odd, I hadn't bargained on my redemption amount being higher than the original loan.

[Gatz]

Hi James31(or anyone with advice)

 

I am very interested to see where you get with this, I am in almost an identical situation. Firstplus secured loan taken out in July 2004. The loan amount was £50k over 20yrs @ 8.9%. Over £104k to pay back. Asked for settlement quotation in Dec 2007 and was told......£50263.53 !!!! Have already paid back £21k. I have recently accepted an offer on my property, so will hopefully be moving soon. My position then will be that I should have approx £30k to £34k available. All I wish to do with this is to get rid of the above loan.

 

I am not sure what to do yet. Hope you keep updating.

 

Gatz

[RFC1872]

James31

 

Reidnet and myself have both taken issue with extortionate interest charged by FirstPlus who have been calculating the interest on loans using the recently defunct Rule of 78. Reidnet won his full settlement without taking them to court. I have sent my claim to the Financial Ombudsman - my circumstances are very similar to yours i.e 50K loan over 24 years, settled early and charged £50,600 approx.

 

Will let you know what happens. Inevitably it will take months for the case to be settled but I think it will be worth it.

 

Look at posts by Reidnet re this very issue.

 

Best of luck with everything

 

Rebel1

 

 

If rule 78 was found to be unfair then surely it should mean that anyone having a loan settlement figure based on rule 78 have been treated unfairly and as such are entitled to compensation. If its unfair then its unfair????????

[steven4064]

I think the unfairness of rule of 78 comes when it is used to calculate early repayment amounts, not otherwise.

[killylilly]

I have loan with firstplus, 20k in 2006 then advance totalling 34k,can i check that my agreement is enforceable,even though i am over the 25k limit before it can be deemed unenforceable? I had a company tell me that they cant pursue this as it is over 25k??

 

Gaz

[James31]

Just coming back to this thread after 2 years and I see that settlements paid where rule 78 was used to calculate that settlement on unregulated loans (i.e. over 25k) is open to challenge.

 

Has anybody tried and succeeded in claiming back the interest portion of their settlement to firstplus for a loan over 25k?

 

If so, what is the correct/fair method for calculating the settlement figure?

 

To recap, I borrowed 50k in May 2004 and repaid 52k in March 2007.

[James31]

Letter sent to FirstPlus. I outlined what I think the settlement figure ought to have been and have asked that they repay the difference, plus 8% interest.

 

Let's see what they say.

[ajs444]

Subbing with interest, might be in the same boat

[ncf355]

Hmm

 

So given that my loan was taken out in 2000 and repaid in 2006, will I not be covered by this?

[Surfer01]

If we could have more info on thsi it woudl be appreciated as we took out a loan for 52k in 2004 and then sold the house in 2006 but ended up with a deficit of about £6000 after paying £550 for 18 months!

[ajs444]

Getting some facts and figures now. Took out loan of £45000 in

September2004 and consolidated it into another loan in June 2007.

Payments made were £12,115 and settlement figure was £42,948, so only

£2000 (approx) was deducted from original loan.

Any advice?

[James31]

Perhaps yours was calculated fairly already? (i.e. not rule 78 ).

 

Without working it all out properly, I borrowed a similar amount to you and spent almost exactly the same period paying it back before I settled.

 

However, unlike yours, my settlement figure was over £2,000 more than I borrowed - whereas yours was over £2,000 less.

 

I calculated the difference to be over £5k on mine between acturial and rule 78 methods, with interest at 8% which takes it to around £7k.

 

I could be wrong, but on the face of it, doesn't it seem like you had a fair settlement? (However unfair a front-loaded loan seems!)

 

James

[James31]

Response rec'd from FirstPlus. They dispute my claim, saying Rule of 78 usage was fair as it applies to regulated loans so why not unregulated ones. This is nonsense.

 

I have sent letter before action today.

 

Here is a snippet from the most important part of my LBA:

 

"Section 58 of the OFT document “Non status lending guidelines for lenders and brokers” states that use of the rule of 78 in unregulated loans is liable to challenge under the Unfair Terms in Consumer Contracts Regulations (July 1995). Schedule 3 of those regulations shows by example the use of the rule of 78 in settlement of an unregulated loan which results in a disproportionately high figure. A term to which the regulations apply shall not be binding on the consumer if it is unfair.

In addition, regulation 6 of the Unfair Terms in Consumer Contracts regulations provides that a written term of a contract must be expressed in plain, intelligible language. The OFT have not encountered any contract term which describes the operation of the Rule of 78 in a way which is likely to enable the consumer to understand it and appreciate its significance."

[Surfer01]

James31 that is very interesting as they used rule of 78 to calculate our settlement which then left us with a deficit of £5700 which we are still paying off.

I am not exactly clued up on this but are you saying that a secured loan is an unregulated loan and that the settlement figure can be challenged?

I think I need to dig up the figures they supplied because if we can get the £5800 wiped out we would be grateful. After 4 years of paying £70 per month we still owe £5600 with 9 years left on the contract.

[James31]

Surfer, loans over 25k are "unregulated". That's the basis for my argument.