The Banking Mistake That Means Your Loan Could be Unenforceable or Unfair Which Could Mean Your Loan Is Written -off. Speculation is rife that the majority of these loans were set up incorrectly, mainly down to the loan provider’s haste, lack of understanding or incorrect interpretation of the Consumer Credit Act (1974) covering loans up to £25,000 and set up before April 5 2007.
With the credit crunch taking its toll, more and more people are feeling the pinch and are gaining confidence in challenging their loan providers on the legality, unenforceability or unfairness of their loan agreements, such as Credit cards, personal loans, secured loans as well as HP and car finance agreements.
The main reasons for claiming are:
- The loan was not set up correctly under the Consumer Credit Act (CCA) 1974
- Incorrect APR (annualised Percentage rate) was applied
- Overcharging of Interest and administration fees
- Failing by the lender to administer the loan correctly
- Failure to provide clients with the correct credit agreement and documentation
- Failure to set out the details of the consumer credit act
- Adding PPI (payment protection insurance) and charging Interest on it
If ANY of these apply, your loan may be deemed Unenforceable
Where your loan is deemed unenforceable by a court, the loan company cannot legally come after the loan or force payment, even though there is a balance outstanding in effect leaving you with either nothing to pay or possibly having your loan payments written-off.
Nowadays the courts appear to be taking a more conservative view regarding the unenforceability of loans and want clear guidance from the Law Courts on how to proceed including test cases. While the scope for assessing a loan for unenforceability is restricted, certain legal experts are now pursuing claims on an Unfair basis.
These loans are NOT subject to limitations of unenforceable loans which means claims can be made:
- On Borrowing from £2500 to unlimited amounts
- For loans taken before and after 05 April 2007
Here are just a few examples of where loans could be deemed to be unfair
- breach of prescribed loan terms by the lender
- evidence of unreasonable harassment by the lender
- For Credit cards – the client took out the credit card under a 0% (6/12 month) and knew that it would increase to (eg:6%) but then, say 2/3 months later the lender further increased the APR and the client had nowhere else to turn other than to transfer to another credit card with % transfer fee thereby incurring more charges
- PPI has been added to the credit card or loan thereby increasing the APR without the client being aware of the increased APR
- The Client was self employed and told that the PPI cover was applicable without making the client aware of the onerous nature of claiming
- Some polices talk about “closed companies” ( the definition of “closed companies” would exclude the majority of people who are directors/members of small to medium sized businesses)
- Churning or refinancing – where the client goes to the existing lender and there is an abuse of trust that the client is unaware of the numerous charges in refinancing the previous loan at the coercion or encouragement of the lender
- There has been Breach of Fiduciary duty in that the lender is the client’s bank
- and as such knows the clients circumstances and abuses that position by mis selling PPI
- There has been some misrepresentation that induced the client to take out the loan
How to make a claim
The two most popular options are:
- Using a respected, regulated claims handling or legal company. Charges are typically 25% plus VAT for handling your claim, usually on a “no win no fee” basis which means you don’t pay a penny if you don’t win compensation
- You can raise a claim directly to the loan provider yourself. If your claim is rejected then you can go the Financial Ombudsman Service (FOS) who will investigate for you. However it’s not without it’s complexities
Both have their own sets of advantages and disadvantages; if you do it yourself, of course you’re saving on the cost.
If you’re claim is rejected or worse still if they accept your claim you are highly unlikely to get back the full amount of compensation. It has been noticed when handling offers of compensation that the lender will hope you will take the money and run, when by just being persisitent and following through the claim to its natural conclusion get result in MORE compensation.
Quality claim handling companies will check any offer, challenging where appropriate. They also have the advantage of using experienced legal team who are well placed to challenge rejected claims and deal with the potential complexities with cases that are sent on to the Financial Ombudsman Service (FOS).