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Banks May Be Challenged Over Unfair Loans

[ Posted December 19th, 2008 ]

 This year, has not been a favorable one for the banks especially here in UK. The banks are now facing a new challenge posed by the unprcedented discovery of thousands of unfair loan deals. According to Consumer Credit Act (1974), consumers can challenge the validity of their loans under the pretext of “unfair relationship test”. If you have a personal loan with a current balance of £5,000 to £25,000, which were made active before April 2007, you can be eligible to make unfair loan claims after appropriate scrutiny. With these unfair loan claims, the UK banking industry can lose billions of pounds in consumer debt. It has been estimated that a shocking 60% of personal loans are unfair and as per insurance experts, around 79% of the loans are vulnerable to full legal challenge.

The reason for this fiasco is because the banks may be receiving higher payments from their customers than the agreed values through incorrect wording or poor documentation. Unfair Made Fair is taking the lead in evaluating the loans and if they discover that the loans are unfair then you can process your claim. According to the director of Unfair Made Fair and sitting magistrate Alan Kneale, if the loan documents are unfair, then consumers can sue the financial institution seeking compensation for the negative impact their unfair loan had on their credit score. He said that there is clear evidence which shows that a number of high street banks have as many as 30 loan agreements in force and most of them are unfair because they have not been rewritten from scratch rather they have been, “added to, altered, plagiarized, cannibalized and amended”.

There are number of factors which will effect the validity of a consumer claim. Following are some of these factors

• Discrepancies in the total value of the credit owed
• Number of dues
• Rate of interest
• Frequency of repayments

If there are any drafting errors in the above listed areas then it will make the loan balance null and void. According to court’s rulings, such loans will automatically become ‘contingent liabilities’. This will have an extremely negative impact on the balance sheets of the banks especially in a situation where they expected to raise billions of pounds to fight liquidity.

There will be a deadline fixed before which the claims can be filed so that it does not remain open perpetually. Therefore, Unfair Made Fair has requested consumers to review their loan documents if they should have even the slightest doubt. In this scenario, banks have very little grounds to defend themselves. According to legal experts, if you have any Payment Protection Insurance that you got along with your loan, then your claims have better chances of success.

This problem could have been easily avoided if only banks were careful with their documentation. It is hard to believe that how some of the high street banks can be so unprofessional in their approach, which has lead to their own loss. aims to provide every client with cheap, affordable and best mortgage loans in the UK market, however the actual mortgage rate available will depend on client's financial circumstances and credit history. Although, has made every effort to ensure that the mortgage rates listed are correct, it bears no responsibility in case of an error. 
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