Wed 02 Oct 2019

Are your mortgage terms for additional borrowing fair? They might not be!

The Co-operative Bank plc, trading as Platform, has given an

So why have they done this and what was the offending term?

The offending term - "If we agree additional borrowing, it will be charged at the interest rate applicable at the time…."

The crux of the issue  - the ambiguity of the wording "the interest rate applicable at any time" meant Platform could charge any number of rates and the consumers could suffer detriment as there was no clarity on what rate would apply.

The legal bit - section 68 of the Consumer Rights Act 2015 requires written terms in consumer contracts to be transparent: where a term could be applied in different ways section 69 requires that it be applied in the way most favourable to the consumer.

The fix

  • a new term stating that additional borrowing will be based Platform's range of available borrowing rates, available on their website
  • communication with 69,000 customers to tell them about the new term
  • applying the unclear term in a fair way until the new terms was in use
  • a redress exercise to pay an estimated £3.4 million to 1,200 customers would took a further advance between March 2008 and May 2019

What next?

All firms should consider the transparency of written terms in their consumer contracts. Mortgage firms, in particular, should look at their language on additional borrowing rates. If you are a consumer entitled to redress from Platform they will contact you directly. If you are a consumer that has taken additional borrowing with another lender you should check the terms of your original contract. 

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