FirstPlus Rate Increase - Has this happened to you? I'm interested in your evidence!

[smj]

Firstly, sorry if this is the wrong forum, please bump this to somewhere more suitable if it exists...

 

The reason I am posting is because I am interested in getting information from anyone who has taken out a FirstPlus loan and had their rate increased for no apparent reason.

We took out a debt consolidation loan for more than 50K a few months ago. I looked around on the net and spoke to a few people and it was the best course of action for us. Indeed, we are paying £200 less a month and that has made a huge difference. Of course, the total cost of the debt will be huge, but we don't expect to see the loan to full term, for various reasons.

I have a relatively good grasp of financial services - but probably not as good as some of you lot! Because of this I spent some time looking into the FirstPlus loan. It is variable rate, but they presented it pretty much as a "tracker".

FirstPlus use the Finance House Base Rate (FHBR)(Finance House Base Rates) as their base rate. I looked around and a few people have posted to various forums saying "we took out a first plus loan 2 years ago and the rate has gone up by 2%" and this sort of thing. Fact is, that didn't worry me because the FHBR has gone up by 2%. If anything, I thought this wasn't a bad time to get a variable rate loan because the FHBR was probably going to come down - and indeed it has. In October, it was 7%, it's now 6.5%.

So imagine my surprise when I got a letter from FirstPlus telling me that my rate was going up from 7.6% to 7.9%...I was absolutely livid, to put it politely.

Now, I strongly suspect that in the same way they tried (but failed) to sell me very, very dodgy PPI, they have talked down the "variable" rate and the fact that it is "linked to the FHBR". Their terms state: "We may from time to time vary our interest rate. We may increase or reduce our interest rate to reflect a change which has occurred, or which we reasonably expect to occur in interest rates generally or to ensure that our business is carried on prudently, efficiently and competitively" (terms here: product small print )

 

What I would like to know from as many people as possible is:

 

1) Has anyone else experienced this? The FHBR has steadily been going UP since 2006, but has anyone experience of their FirstPlus rate going down? If not recently, what about prior to 2006?

 

2) Has anyone had experience of them increasing the rate every 3 months by 0.3%? There seems to be some evidence for this.

 

3) Does anyone have experience of them taking you on with a low rate and then steadily increasing it, by more than the FHBR, or increasing it when the FHBR goes down?

 

4) Depending on how they fund their loans, the current problems with high-cost inter-bank lending might be a factor. Does anyone know if that is the case?

 

5) Since we paid off all our other debts, we put some money on a credit card ( the only one we kept, with a very low limit) over Christmas. We had previously paid off that card using part of the FirstPlus loan. I wonder if that has affected their view of us as a 'risk' and caused them to increase our rate? Anyone have any thoughts?

 

What I am actually trying to determine is if I have been suckered. Will the rate just go up and up by 0.3% every 3 months until all the cash we freed up every month has been swallowed and we are back, or even worse off than when we started? Surely there must be some FSA protection against this sort of thing?

 

You see, I cannot believe that they could be so stupid, or that they would be permitted by the FSA, to 'entrap' you with a low rate, then just bump it up every few months. Eventually, lots of people would default and they would surely start having all kinds of haslle trying to get their money. I did see someone who had posted to a forum saying that they had a FirstPlus loan and the rate had "fluctuated" over 3 years, so it seems that it does go down sometimes too.

 

Finally, I am sure that some people will read this and think "ha ha" or "what do you expect" or have some thoughts about what FirstPlus might be up to, but what I am really interested in - and, indeed, what would be useful for others planning on using them to consolidate - is what they are actually up to. So the real experiences of anyone who has dealt with them would be greatly appreciated! It would help if you could say how much your loan was for and how much your rates had changed and when...(or at least the latter of the two!)

[Goldlady]

I am subscribing to your thread as I am currently working on claiming missold PPI for some friends who borrowed about the same amount as you did. I have spent today listening to all the taped transcriptions received with the SAR and my initial feeling was 'what a nice bunch of people' as they added back arrears to my friends' loan and were soooo helpful. But their payments have gone up substantially and it was after we successfully fought a repossession claim last year that I suggested we researched the PPI - 13K for five years cover front loaded onto a 25 year loan.

 

I will look at the interest rates as so far all I have concentrated on is the PPI and the arrears situation.

[smj]

Thanks, that would be great. Something that people miss, I think, is that if their rate is really connected to the FHBR, it has gone up by 2% over the past 2 years, so they could legitimately have increased someone's interest rate by 2%. What I am wondering about now is if they have put ours up because we used a credit card that we had previously paid off, so they now believe that we are more risky. I'm not sure, basically, if this is something they are doing legitimately, or if they lure you in, then push the payments up. I am going to write and ask them why they have done it - I don't expect to be told. I am also going to use a SAR to get a copy of the discussions we had on the phone and look over that, because they certainly implied that the rate was variable, but fairly stable...after that, I might wait 3 months and if it goes up again, start an FSA complaint.

[smj]

...and I have been burned with PPI in the past, so the FP PPI sounded ludicrous, so I'm glad to say I didn't go for it, at least that's a good thing! There's a thread on this forum with people who have had some FP experiences, mostly with PPI if that helps you, it's on Moneysupermarket.com

Edited October 12, 2008 by jonni2bad

[Goldlady]

Thanks I think I need to find out a bit more. I have not really learned anything from the tapes and I don't think I have a copy of the insurance policy/documents. I must say that they did check on more than one occasion with each of the parties whether they agreed to the PPI, which is where I heard mention of the 'five years' Thanks SMJ.

[peterdo]

The FHBR will probably be linked to some obscure lending rate, although that said, rates in the money markets have increased substantially in the last 6 months, at a greater rate than the BOE rate rises.

 

However, I bet it wont come down as easily!

[cokezero]

Thanks, that would be great. Something that people miss, I think, is that if their rate is really connected to the FHBR, it has gone up by 2% over the past 2 years, so they could legitimately have increased someone's interest rate by 2%. What I am wondering about now is if they have put ours up because we used a credit card that we had previously paid off, so they now believe that we are more risky. I'm not sure, basically, if this is something they are doing legitimately, or if they lure you in, then push the payments up. I am going to write and ask them why they have done it - I don't expect to be told. I am also going to use a S.A.R - (Subject Access Request) to get a copy of the discussions we had on the phone and look over that, because they certainly implied that the rate was variable, but fairly stable...after that, I might wait 3 months and if it goes up again, start an FSA complaint.

 

From memory my rate just started climbing, dont remember it ever going down, When i phoned to complain they implied it was due to the bank of england base rate increase.

[TwinsMum1]

Mine keeps on increasing no matter what gone up lamost £60.00 since the start.

[Mark Wilson]

Not sure where you got to with your battle. See my other threads, I have massive issue with FP and rate increases and have worked out that my underlying flat rate has increased from 6% to 9% since inception.

 

The rate is stated as variable but my opinion is that it is an increasing rate loan, one which their vague terms allow them to do what they want with. I have tracked their rate changes against FHBR and Bof E and their is correlation when rates go up but nothing compensatory when rates come down.

 

When the loan was sold to me it was never described as variable and was only stated as such on documentation for signature when it arrived. Working in the sector I made the assumtion that it would move in line with base and thought nothing untoward. I am now £100 per month worse of than when I started. The last tiem FHBR or BofE rate was at this level my repayments were £70 lower than they are now.

 

I have asked them for feedback and been fobbed off with 3 different excuses, have asked for copy agreement over 1 month ago and also asked for copy letters when rates changed as I wanted to understand what rationale they used when payments changed, ie did they specifically mention Bof E or FHBR.

 

I am happy to enter into further dialogue as I think there is a massive issue with not just FP but ALL secured loan providers from what I have seen and this needs taking to task.

[sleepz]

where I heard mention of the 'five years' Thanks SMJ.

 

Goldlady, I think the 5 year thing your referring to is a clause in the PPI with FirstPlus, that if you don't claim on the PPI, don't miss a payment and probably aren't late with a payment, they'll refund you all the PPI payments you have made in that time. Obviously it's still a con as your paying back the PPI for the entire length of the loan.

 

Im trying to look more into the First Plus PPI, but that's what I think was meant by the 5 year thing.

 

Also, I think the PPI only covers you for the first 5 years, after that your still paying it, but you can't claim on it.

Edited October 13, 2008 by sleepz

[Mark Wilson]

I have today received a copy letter from a colleague of mine who is also struggling along with FP. Although it is quite old the wording FP used when applying a rate increase was...

 

"The most recent Bank of England decision forces FP to increase APRs for all accounts from ....

 

As a result your monthly repayment will increase to £.... to reflect your new APR of ...%"

 

I see nothing here that is open to any debate as to why the repayment increased...

[Goldlady]

You need to look at angling man's thread about the PPI and the five years;)

[AbuHaneefah]

Hi I have this same problem with First Plus.

 

In fact - even when the Bank of England rate went down, i got letters increasing my APR.

 

I think my original APR was 7.9% its at about 10.5% now!

 

When I remortgaged my property they asked me to re-sign a charge for the house and return it to them. (I didn't do this)

When I called up and asked why I needed to sign another charge they said that they couldn't find the old one!

 

I have a £35K loan with them and I am now struggling to pay with the increases. I didn't take any PPI,l I learned my lesson about those from smaller loans!

 

With the base rate now at 3% I haven't received any notice that the APR will drop!

 

Has anyone else?

[magicnut]

Hi,

I am new to the site and am too experiencing the same problems with first plus, which led me here.

Since I took out the loan in 2005 the interest rate has only increased. In one year it has gone from 9.4% to 10.8%. I have a copy of a letter here notifying me of an increase. It states that...

"Any changes to the bank of england interest rates or Finance House Base rate (FHBR) could affect the rate we charge our customers."

However with the decrease in the bank of england rate there is no sign of a decrease in my interest rate.

[Mark Wilson]

Magnicut, any chance of posting the letter from FP re rates. I am about to reply to them and copy in FOS as they have a clearly unfair term, that I believe is not illegal but is not explained to anyone on signing as to what will happen to their facility over time. Below is what I am telling them...

 

"

Thank you for your reply to my recent issue. As you state, the response from FirstPlus may not “be the answer I wanted”, however it is almost to the word exactly what I expected and it is this avoidance of the issue that concerns me.

As you state you have sold me a variable rate agreement and in the mortgage world this carries with it a certain meaning and understanding that First Plus know all to well. When you make your confirmations over the phone you do no more than mention that this agreement is variable rate and explain nothing more than that, which I feel mis-sells the agreement and its mechanism. My dialogue with yourself and others has clearly indicated a lack of understanding as I have had FHBR and LIBOR attempted to be thrown at me and a point blank refusal of any link with Bank of England base which has been the clear justification, as witnessed in letters, every time repayments have gone up.

This underlines the misuse of the term variable as the mindset of the public and myself would be that upward movement in Bank base would mean loan repayments increased. When rates move the other way, suddenly Bank base is nowhere to be seen as a measure used. My understanding, along with many I am in contact with, is that you carry a completely different perception of the term “variable”, are 100% understanding of how your rates will change, you know it is different to that of the population, yet do nothing to explain the nature in which your “variable rate” loan affects people. It is this lack of explanation that I feel breaches moral and ethical levels as this should be emphasised verbally at point of sale to make sure people understand. It was not explained to me and I would welcome copy transcripts of my sale process to clarify this. I would add at this stage that your introducing brokers have managed to corrupt their tape of dialogue with me, as confirmed when I challenged them about the mis-selling of my PPI. Be under no illusion that to simply say “you were aware of the terms and conditions when you signed the agreement” will in anyway be an acceptable excuse for, what in practise is proving, a blatantly unfair term.

Whilst you will not disclose the information, my guess is that people are enticed under an attractive APR, then over time are gradually moved into the 12 -14% APR banding and then are left there throughout the course of the agreement. I have yet to speak with anyone in a position where their APR is lower, or even close to where they started, irrespective of when their loan started. Interest rate cycles fluctuate, your business model will accept that, knowing that you have a chance to increase your return over time and hold your position when the cycles move down again, using the funder favouring term in the agreement. LIBOR and Bank base have dropped significantly this last week and what has been the response from First Plus…..I still await confirmation of the significant reduction in rate and payment that would be occurring under a fair agreement. As a Barclays Bank business, it continues to maintain its AA credit rating and you will no doubt benefit accordingly from that, when underlying cost structures are calculated.

The implication is that First Plus do not / did not do enough to explain how a customer will be affected over time through taking a variable rate agreement, as such the type of loan you offer, working in a completely unique manner, you should be obligated to do more to take customers through this not just hiding behind a vague and self supporting term, which is essentially what the reply from First Plus proved.

The clear fact is that First Plus are hiding behind this vague term stating that it can do exactly as it likes, not justify what it has done, not be prepared to evidence why it has behaved as it has done, nor prove the underlying rationale to what it has done and not accept that it offers something under the banner of an industry understood term – “variable”. This is based, as you state, on the fact that it can make any decision based on what it feels (“can reasonably expect to occur”) and increase its profit margin per deal throughout the course of an agreement (“ensure our business is carried on competitively”) thus rendering your term unfair.

As has been stated, First Plus has no further interest in dealing with this matter so copies of this letter and recent correspondence / investigation will be forwarded to FOS.

In the meantime, I welcome any feedback and offer of resolution from First Plus. I will gladly receive notification of significantly reduced interest rates in line with recent market changes, that you are applying across the board if my complaint is to be proven to lack substance and truth. "

I am ready to apologise in full when my variable rate loan is exactly that but as of now, no chance!!!

[AbuHaneefah]

T Hanks Mark.

 

This is exactly the case.

 

Its a 'Variable' rate seems to have a one way valve and only goes up.

 

I have no idea how much more it is likely to climb and it seems everyone else is in the same boat.

 

Any idea how to deal with this?

 

Would a load of us writing to Watchdog to get them some more 'fame' do any good?

 

Anyone have any advice on what letters to send them?

 

 

Thanks in advance

 

Kind Regards

[Mark Wilson]

My letter has now gone to them so I wait the standard fob off reply with baited breath. Every interest rate measure they can justifyusing is / has fallen and yet they do nothing.

 

As you say, all letters re rate rises link to a term we would all be deemed to understand but when asking things to come down the way then NOTHING!!!

[magicnut]

Hi,

 

Your letter sums up exactly what I too have been going through with fp.

When I took out the loan I understood the term variable in mortgage terms and when it was sold over the phone it was called a variable rate loan but then discussed no further. Here is the letter re rates dated January 2008 (sorry for the delay)

' As a FIRSTPLUS customer the rate on your account is variable. Any changes to the Bank of England interest rates or Finance House Base Rate (FHBR) could affect the rate we charge our customers.

Since our last interst rate increase in July 2007, there have been further increases to the Finance House Base Rate. We will now be changing your rate. Please refer to your credit agreement and the enclosed FAQ for more informtion.'

 

The letter then goes on to say that the rate will increase by 0.3% and then details new payment and DD information.

I have received 5 of these increase letters since feb 2007.

[Mark Wilson]

That is interesting indeed as your rate changes appear out of syn with mine. Why would they not apply increases across the board and be doing it selectively?

 

I had rate increases in Feb 2007 of 0.3%, April 2007 of 0.5% and July 2007 of 0.3% and then nothing since. My loan started at 9.4% apr and is now at 12.10% apr.

 

It just astounds me that ALL increase letters relate to FHBR and BoE yet when I talked to them about this they say there is no link whatsoever so don't expect your payment to go down.

[magicnut]

Hmmm that is strange and how can they say that there is no link when their letters clearly state that the increases are due to both the FHBR and BoE. But I suppose that rule is fine for them as long as the interest rates are going the right way!!

It is very interesting that our interest rates started at the same point of 9.4% but are now very different? I agree surely if it is based on FHBR and BoE increases should be across the board?

I too had an increase of 0.3% in Feb 2007 stating the Bank of England interest rate increase as the cause. Then in April 2007 mine too went up by 0.5% this time due to the FHBR, the next was also July 2007 and went up by 0.3% due to the BoE, then Jan 2008 up by 0.3% due to the FHBR, the last was April 2008 and due to BoE. My rate s now 10.8% and i'm half expecting to get another one!!

[The_laney]

Hi, Same position as everybody else here, standard response to my letter, i noticed this on the First+ website though.

 

"The interest rate on your loan is variable. This simply means that your rate could go up or down in line with market conditions."

 

What is the definition of market conditions ?

[AbuHaneefah]

Just got a letter saying my rate has been decreased by 0.8%

 

Still leaves me 1.3% above what I took the loan at when the Base rate was 5.5%

 

Anyone else had this decrease?