Woman in legal bid over 20pc home loan rate
Published 14/03/2011 | 05:00
A WOMAN who was charged an interest rate of almost 20pc on a sub-prime loan secured on her home has raised a legal action, claiming that the rate was "unconscionable and oppressive".
The woman, who took out a short-term loan with sub prime lender Secured Property Loans Limited (SPL) in 2008, will ask the High Court today to prevent the lender from repossessing her home because the loan represented "an unconscionable bargain".
The test case is one of a series of actions set to hit the courts by borrowers who could not secure credit from mainstream banks and claim they were charged "exorbitant" interest rates by sub-prime lenders.
The woman borrowed €125,000 over 12 months at an APR of 19.41pc. The loan was secured on a pub, also her home, in Co Clare.
Broker and procurement fees of some €6,250 were also charged and the total cost of credit was €28,750 for the term of the loan. The woman, who received independent legal advice before she took out the loan in January 2008, claims she was "under extreme financial and emotional stress" at the time.
Last year, the Master of the High Court refused to grant a summary repossession order to SPL and directed the case proceed to a full hearing at the High Court before a judge.
The Master said the woman was "in extremis" and had made out an arguable defence to the repossession action.
The woman claims the rate of interest charged under the loan contract is exorbitant, the loan itself oppressive, and the bargaining strengths between the parties unequal.
Stipulated interest rates on loans are binding on debtors but in other countries rates deemed excessive by judges have been struck out or reduced.
Ron Weisz, secretary and director of SPL -- a retail credit firm regulated by the Central Bank of Ireland -- last night defended the company's loan rates and procedures.
Mr Weisz told the Irish Independent that all borrowers were told, orally and in loan documentation including a customer care booklet, that the interest rates charged by SPL were higher than the interest rates charged by most banks and building societies.
"We tell borrowers that if the interest rate, which is fully explained, is too high for them, they should not apply for or consent to a loan," said Mr Weisz.
"We also insist that borrowers get independent legal advice. Our service is very personal. We are not a bank and we do not take deposits. We only lend money secured on property."