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Contractual Interest - Exempt from fairness?


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Trying to look into the legal basis for contractual interest and am a bit unsure of what I've found so far...

Regulation 5 (1) of the UTCCR states as follows:

Unfair Terms

5. – (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.”

So far, so good. However, from Consumer Direct - Unfair terms in contracts...

"Terms in consumer contracts that 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."


Presumably the overdraft interest rates you'll be charged "set the price" and are thus a "core term", and therefore exempt? What does anyone else think about this?


Also, has anyone successfully argued the basis for CI in court, where the bank have actually turned up to defend it? What evidence was used?


WM x




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Having said that, p.11, section 3.4 of the OFT report says that:


"Default charges are not 'core terms'

3.4 'Core terms' relate to the definition of the main subject matter of the contract or to the adequacy of the price or remuneration as against the services supplied in exchange. They are subject to the UTCCRs, but are outside the scope of the test of fairness by virtue of Regulation 6(2). We do not consider that terms providing for default charges are core terms. (In this context the breaches of contract which may lead to a default charge typically arise where a customer exceeds a credit limit, fails to pay or fails to honour a payment.) Consumers do not generally enter into such contracts expecting to incur these charges. We consider that the charges are not the substance of the bargain but are simply an incidental charge that is applied if some of the main obligations are not complied with."

Could this logic be applied to the unauthorised o/d interest rate? If so, would it mean that you could claim CI at the unauthorised rate, but not at the authorised rate as you expect to be charged interest on your o/d?

Just thinking out loud...

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