# Woman loses challenge to 20% mortgage rate in the High Court



## Brendan Burgess (15 Mar 2011)

This is a very interesting case reported in today's Irish Independent.



> In the first case of its kind in modern Irish legal  history, the High Court has been asked to reduce the interest rate  charged by subprime lender Secured Property Loans Limited (SPL) to as  little as 5pc.[from 20pc]
> 
> 
> The woman received independent legal advice before she borrowed €125,000 from SPL in 2008.
> ...


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## Bronte (16 Mar 2011)

Following this case in the news myself and personally cannot believe she has any case and that she is paying lawyers willing to go to the High Court on a point of law that to me makes no sense.  This  is going to cost her thousands and if she won, everybody above 5% presumable will be clambering over themselves to go to the High Court.  What legal advice says that a High Court can decide your interest rate shall be 5%.  Why have banks at all.  

She borrowed the money, she knew the rate, she got independant advise, she signed the documents.  Her personal circumstances, (stress, tax, ex husband etc) cannot fathom how this is relevant.  

Basically the case seems to be that she doesn't like the rate she is paying and wants the courts to decide what interest rate she shall pay.


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## horusd (16 Mar 2011)

I have a fair bit of sympathy given the apparent circumstances that led the woman into this loan arrangement. But given she had legal advice I can't see what her case is.She went in with her eyes wide open, there was no coercion on the part of the lender, and they seem to have been more than totally upfront. I'm really interested to see how this pans out.


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## ontour (16 Mar 2011)

This is a bizarre case and bears no relationship to the problems that most people have.  This loan was taken for a short term and is unlikely to be in negative equity.  The borrower sought and received legal advice.  There is nothing to indicate that the rate has changed.  The borrower make assumptions and these have been wrong, there is no indication that the lender has done anything wrong.  She could sell the pub and pay off the loan.  She may need to to cover the legal costs that she is going to incur.


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## alaskaonline (16 Mar 2011)

Did the article state what the interest rate was when she signed the contract? If the contract clearly indicated that they can be as high as 20% fair enough but if the interest started at 5% - 20% is a huge increase and i'd love to see the justification (other than "it's a free market we can do what we want) for it.


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## demoivre (16 Mar 2011)

alaskaonline said:


> Did the article state what the interest rate was when she signed the contract? If the contract clearly indicated that they can be as high as 20% fair enough but if the interest started at 5% - 20% is a huge increase and i'd love to see the justification (other than "it's a free market we can do what we want) for it.



I'm not saying it's right but anyone on a standard variable rate mortgage could technically have to face any interest rate as they are totally at the mercy of the banks!


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## ontour (16 Mar 2011)

oldnick said:


> Maybe its an oldfashioned view point but there is a moral argument here.  If somone does not believe that  exorbitant high interest rates -several times a profitable level - are immoral, and that loan-sharks charging those rates are a disgusting abomination then there is no point arguing with them.



If the person could have accessed the funds for a lower interest rate, they would have.  If such loans were 'highly profitable', then there would be lots of competiion for them and this would drive down the rate.  Many loans that charge high interest have a high rate of default and a high collection cost.  

19.4% is around the rate for many credit cards, it is not in the range of loan sharks.  There are lenders across the pond that charge over 1700% and I would agree with your sentiment regarding such lenders.  This lender insisted that the customer get independent legal advice, IMHO they are a sub prime lender that has acted responsibly, probably more responsibly that many mainstream banks have acted.


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## Brendan Burgess (20 Mar 2011)

Kathleen Barrington has a story on this today. The company involved is owned by Ron Weisz who also trades under Wise Mortgage Company and Wise Finance Company. (Note these are unconnected to the Wyse Property Management Company in Baggot Street)


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## McDuff (21 Oct 2012)

Has there been a decision on this case by the hight court?


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## Brendan Burgess (21 Oct 2012)

Hi McDuff

She lost her case. Secured Property Loans are entitled to charge 20%. .  Secured Property Loans Limited and Elizabeth Floyd

Anyone interested in the topic should read the full case, but here is the conclusion 
*
8.2  the Court has no jurisdiction to grant relief to the defendant in  respect of the high level of interest payable under the mortgage.  Any  regulation of interest rates charged by lenders to borrowers is a matter  for the Oireachtas.  *


5.4    In  outline, the legal basis on which it was submitted by counsel for the  defendant that the plaintiff’s claim for possession cannot be maintained  is predicated on the rate of interest charged on the mortgage being  exorbitant, constituting a penalty levied on the defendant, being a  source of unjust enrichment for the plaintiff and being usurious.  It  was submitted that under its inherent equitable jurisdiction the Court  may strike down or modify a rate of interest or premium contractually  due to a lender, where it is of opinion that the liability of the  borrower accrues on foot of an unconscionable bargain.  It was further  submitted that, since the repeal of the statutory restrictions on usury,  the Court has an added equitable jurisdiction to set aside transactions  which provide for an exorbitant rate of interest, if the justice of the  case so requires.  On the latter point, counsel for the defendant  relied, in particular, on three cases...


[He quoted this earlier case on the tests for a contract to be unconscionable]


“First, one  party has been at a serious disadvantage to the other, whether through  poverty, or ignorance, or lack of advice, or otherwise, so that  circumstances existed of which unfair advantage could be taken. 

Second,  this weakness of the one party has been exploited by the other in some  morally culpable manner … and, 

third, the resulting transaction has  been, not merely hard or improvident, but overreaching and oppressive. …  
In short, there must, in my judgment, be some impropriety, both in the  conduct of the stronger party and in the terms of the transaction  itself … which in the traditional phrase ‘shocks the conscience of the  court’ and makes it against equity and good conscience of the stronger  party to retain the benefit of a transaction he has unfairly obtained.”
 



7.2    In  relation to the broader equitable jurisdiction under which the Court may  set aside an unconscionable bargain, compliance with the preconditions  to the Court’s intervention falls to be established by reference to the  point in time at which the mortgage transaction was entered into, in  this case, in January and February 2008.  At that point in time, the  defendant was in need of capital to discharge tax arrears in relation to  the business of the licensed premises and other debts.  While I accept  that there were limited options available to the defendant to raise the  capital she needed, I do not accept that, as was contended by her  counsel, she was “thrown on a lender of last resort”.  She made a  commercial decision, with the benefit of independent legal advice from  the solicitor who is acting for her in these proceedings, to raise the  capital by mortgaging the Mortgage Property to the plaintiff in  consideration of a loan on the terms offered.  The plaintiff made a  commercial decision to advance the loan on those terms on the security  of the Mortgage Property.  It may be that in the commercial transaction  the defendant was the weaker party.  Assuming she was, in applying the  factors outlined by McDermott as relevant to whether she was victimised  by the plaintiff, the questions which arise and, in my view, the  appropriate answers thereto are as follows:





(a)    Was there inadequate  consideration?  If the defendant was charged an excessive or exorbitant  rate of interest, it could be held that there was, in the sense that  what the defendant got, the loan for a fixed period of time, was worth  less in value than what she was obliged to pay in terms of principal and  interest to redeem the Mortgage.  For the reasons set out at 7.3 below,  I am not satisfied that there is evidence of inadequacy of  consideration in that sense before the Court.
(b)    Was there some procedural impropriety on the part of the plaintiff?  In my view, on the evidence there was not. 

 
(c)    Did the defendant have independent legal advice?  On the evidence, in my view, she definitely did.

 



7.3    I have  already recorded that counsel for the defendant submitted that the Court  should take judicial notice of the fact that the rate of interest  charged in the mortgage is out of kilter with the rates charged by other  lenders.  In my view, it is not open to the Court to do so.  While it  appears to be  high, in order to determine whether the rate of interest  was fixed at a level which rendered the bargain between the parties  unconscionable, evidence of a comparative analysis of the rates charged  by other lenders would be relevant but the analysis would have to take  account of all relevant factors, such as the size of the loan, the  duration of the loan, the creditworthiness of the borrower, whether the  loan was to be secured or not, and, if secured, whether the security was  adequate.  No evidence was adduced by the defendant, and, in my view,  the evidential burden in relation to this matter was on the defendant,  on the basis of which the Court could make a finding that the rate of  interest charged was at a level which rendered the transaction  unconscionable. 




8.2    The Court  was informed, although this was not on affidavit, that the amount now  due by the defendant on foot of the Mortgage is approximately €201,000  and the debt is growing.  This reflects the fact that the defendant has  not discharged any principal and has defaulted in payment of interest  since mid-2008.  While the defendant’s concern and her obvious sense of  grievance that she is faced with this level of debt is understandable,  the Court has no jurisdiction to grant relief to the defendant in  respect of the high level of interest payable under the mortgage.  Any  regulation of interest rates charged by lenders to borrowers is a matter  for the Oireachtas.


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