Extortionate Interest Rates

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  • Extortionate Interest Rates

    I've moved into a house as a lodger and signed a "law pack" Lodger agreement. After a closer look the agreement has been altered to charge 100% interest compounding daily on late rents. Is this enforceable?

    If my rent of £435 is late by 1 day it will cost me £870
    If my rent of £435 is late by 2 days it will cost me £1740
    If my rent of £435 is late by 3 days it will cost me £3480....

    As I understand it I'm not covered by the office of fair trading unfair terms.

  • #2
    Probably nothing BUT:

    1. 100% daily(?!). I doubt it could be collected. Remember these people will be lodgers. They are unlikely to have any assets you could seize.
    2. If it came to court, I doubt the judge would view it in a very favourable light, which could make other clauses called into question.
    3. The compounding element would make it look ridiculous within a few days. £200 per months say, one week late, would be £12,800 after a week. If they were a month late, that would be £26.843 billion. Not going to collect that are they?

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    • #3
      Originally posted by paper_mache View Post
      Please answer this question what is there to stop someone who has no previous history of letting property renting out a room in the house they live in to a lodger under a standard lawpack tenancy agreement and changing the interest rate on outstanding balances to 100% compounding daily?
      The law on contractual penalties for a start.

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      • #4
        Originally posted by Lawcruncher View Post
        The law on contractual penalties for a start.
        Can you give further direction on the as I can't find anything relevant on google?

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        • #5
          So if you are a month late you are going to owe just over a gigazillion quids.I hope you have a high paying job.
          I offer no guarantee that anything I say is correct. wysiwyg

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          • #6
            Originally posted by jta View Post
            So if you are a month late you are going to owe just over a gigazillion quids.I hope you have a high paying job.
            I have saved a few thousand pounds for a car I want to buy so unless a judge could overturn it my money would be at risk. Plus I could be made bankrupt.

            Under what Law / Statute / Body could the interest charage be overturned? Or how could I appeal Being a contract between two individuals normal rules don't apply.

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            • #7
              Originally posted by paper_mache View Post
              Can you give further direction on the as I can't find anything relevant on google?
              http://www.gillhams.com/articles/326.cfm

              I think it likely that the UTCCR will apply.

              Comment


              • #8
                A penantly has to represent the cost involved in administering the late payment. In the case of your landlord there is clearly no cost here as the best they will have do is say "oi sunshine you owe me the rent" secondly any charge for interest has to be reasonable (you will note the banks all reduced their unauthorised overdraft rates to ensure they did not lose the OFT case)

                A reasonable interest rate clause would be the Bank of x standard overdraft rate +2% for example.

                The joy of lodging is that you can just to quote Monty Python... run away!!!! and not leave a forwarding address and there is bugger all the LL can do about it. The downside is the LL and say I don't like you anymore and throw you out with little notice.

                I certainly would never pay their stupid interest rate it is unemforceable, however you have learned a lesson I hope, read a contract before you sign it.

                Personally I would just pay the rent on time as you should anyway and see if the LL is a nice person. If not just find somewhere new and pack up and leave

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                • #9
                  100% compound interest per day would mean that rent a month late (say 30 days) would leave you owing;

                  £435 * (2 to the power of 30) = £435*1,073,741,824

                  That’s £467,977,693,440

                  Should go some way to covering the National Debt.

                  Pretty much an unenforceable clause, by the time it gets to court there would not be enough money left on the planet to pay him.
                  I also post as Moderator2 when moderating

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                  • #10
                    *sniggers*

                    Comment


                    • #11
                      As others have said, it's probably unenforceable in law - however the lawpack agreement which has been edited probably shows interest at an annual rate. Therefore, 100%pa simple interest is 0.274% per day.

                      So,
                      If my rent of £435 is late by 1 day it will cost me £870 £436.20
                      If my rent of £435 is late by 2 days it will cost me £1740 £448.14
                      If my rent of £435 is late by 3 days it will cost me £3480 £460.43
                      Even at this much more reasonable rate, it is still likely to be regarded as unfair by the courts

                      EDIT: I wish it was really this easy to save 3 grand in 3 days

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                      • #12
                        Originally posted by Lawcruncher View Post

                        I think it likely that the UTCCR will apply.
                        Doesn't this only apply when one side is a business and the other is a consumer? Or to all contracts?

                        "seller or supplier" means any natural or legal person who, in contracts covered by these Regulations, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned;

                        Based on this quote from the statue it seems as though it does not apply?

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                        • #13
                          Originally posted by Mars Mug View Post
                          100% compound interest per day would mean that rent a month late (say 30 days) would leave you owing;

                          £435 * (2 to the power of 30) = £435*1,073,741,824

                          That’s £467,977,693,440

                          Should go some way to covering the National Debt.

                          Pretty much an unenforceable clause, by the time it gets to court there would not be enough money left on the planet to pay him.
                          But the judge cant just say it a big number so it's void! The landlord could still take everything I have to cover it which I guess is the intention.

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                          • #14
                            Originally posted by paper_mache View Post
                            But the judge cant just say it a big number so it's void! The landlord could still take everything I have to cover it which I guess is the intention.
                            I think you're worrying over nothing. There is no possible way it could be enforced.

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                            • #15
                              Originally posted by paper_mache View Post
                              But the judge cant just say it a big number so it's void!
                              Oh yes he can. £400 billion isn't just 'big', it's ludicrous. No court in the land would find you liable for that for paying £435 a month late.

                              Comment

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