The Irony of the Sub-Prime Lenders
Posted: 21st October 2013
In one of life’s little ironies, two businessmen whose sub-prime lending companies charged some of their borrowers rates of interest exceeding 400% - but who are now themselves labouring under enormous debts – are seeking High Court relief against what they regard as ‘penal’ and ‘oppressive’ repayment terms.
The pair, who once lived luxury lifestyles of large country homes and costly London flats, had sought shelter in individual voluntary arrangements after their companies had their consumer credit licences revoked. The companies were heavily criticised by the regulator and found to have exerted ‘undue pressure’ on borrowers in the form of letters that purported to come from solicitors.
The businessmen had been left with personal debts on which the lender claimed default interest at 35 per cent, accruing at a rate of at least £20,000 a week. The total that they owed was said to have risen to more than £3 million and the lender had threatened to enforce its rights against their private assets.
The Court noted that some of the businessmen’s former clients would consider a 35 per cent interest rate ‘modest’ and might be ‘surprised’ by their claims that it was unreasonable and excessively onerous. The pair had tried to stop the accrual of interest by raising money elsewhere and tendering it as payment for the sums due; however, the lender had declined to ‘allow them off the hook’.
Pointing out that the businessmen were liable to pay the whole sum due, as well as costs, on an unconditional basis, the lender submitted that it was not arguable that they had made a valid tender and sought to strike out their claims. However, the Court found that there were serious matters to be tried regarding the validity of the tender and directed a full trial of those issues. Pending that hearing, the Court granted the businessmen an interim injunction restraining the lender from taking enforcement measures against their assets.