The OFT has recently written to the British Bankers' Association ("BBA") in respect of the ability of banks to vary the standard rate of interest. The OFT considers that the unilateral ability to vary the rate of interest (i.e. the ability of a bank to change its base rate) may contravene the terms of the Unfair Terms in Consumer Contracts Regulations 1994 in relation to products such as mortgages and personal overdrafts. Of particular concern to the OFT are fixed rate mortgages which, after expiry of the fixed rate, require the borrower to continue on the lender's standard variable rate.
The BBA is concerned that the OFT's stance could prejudice the legal basis of many mortgages. Lenders should be aware that the OFT has the power to seek a court injunction to prevent the use of unfair terms.
The terms of the regulations are such that the OFT will have a difficult, but not an impossible task in showing that these type of clauses are unfair. There are a number of possible ways, based on the strict terms of the regulations, that the OFT could successfully attack such terms.
At this stage mortgage lenders should keep a watching brief for possible future developments.
For further information please contact Gwen Griffiths, e-mail: Click Contact Link , 7 Devonshire Square, Cutlers Gardens, London EC2M 4YH, UK, Tel: + 44 171 655 1000
This article was first published in the Autumn/Winter 1998 Hammond Suddards Banking Newsletter.
The information and opinions contained in this article are provided by Hammond Suddards. They should not be applied to any particular set of facts without appropriate legal or other professional advice.
The BBA is concerned that the OFT's stance could prejudice the legal basis of many mortgages. Lenders should be aware that the OFT has the power to seek a court injunction to prevent the use of unfair terms.
The terms of the regulations are such that the OFT will have a difficult, but not an impossible task in showing that these type of clauses are unfair. There are a number of possible ways, based on the strict terms of the regulations, that the OFT could successfully attack such terms.
At this stage mortgage lenders should keep a watching brief for possible future developments.
For further information please contact Gwen Griffiths, e-mail: Click Contact Link , 7 Devonshire Square, Cutlers Gardens, London EC2M 4YH, UK, Tel: + 44 171 655 1000
This article was first published in the Autumn/Winter 1998 Hammond Suddards Banking Newsletter.
The information and opinions contained in this article are provided by Hammond Suddards. They should not be applied to any particular set of facts without appropriate legal or other professional advice.
