Judge orders cancellation of couple’s €576,000 debt

A JUDGE in Britain yesterday wiped out a couple’s debt of €576,000, which had spiralled out of control from an original loan of €8,645.

Tony and Michelle Meadows, from Southport, Merseyside, faced losing their home after they were taken to court by London North Securities for failing to keep up with repayments on their loan, which had an APR of 34.9%.

The ruling by Judge Nigel Howarth at Liverpool County Court is expected to have far-reaching implications for consumers and lenders alike.

He said: “The claimant must be dismissed. The defendants are not indebted to the claimant pursuant to the agreement and the legal charges do stand redeemed.”

The case centred on a number of factors relating to the original loan agreement taken out by the couple in 1989.

The small print of the loan agreement revealed that the couple would be charged a “compounded” interest rate if they ever fell into arrears.

Essentially this meant that the money lenders were charging 34.9% interest on the arrears as well as on the repayments, which soon resulted in the debt growing to an enormous amount.

Judge Howarth said: “Where the rate concerned is as high as 34.9% it seems to me that the combination of factors is so potentially exorbitant that it is grossly so and does grossly contravene the ordinary principles of fair dealing.”

He added: “This is one of the few credit bargains which is extortionate.”

The Meadows also argued that they only wanted an original loan of £2,000 but were convinced by the loan company to borrow more money - to pay off arrears they had built up on their mortgage and to purchase an insurance policy they did not want.

Judge Howarth said the loan company was imposing a condition on the Meadows which was “Hobson’s Choice.”

He said: “If they wanted the loan at all they had to have their mortgage arrears paid off which increased the amount they wanted by more than £2,000.”

The judge said this extra money was, in reality, a charge and therefore the loan had been mis-stated and was unenforceable.

He said: “It is plain in my judgement that the reality of the situation is that the Meadows were very obviously desperate, as many people who seek non-status loans are, to pay for home improvements.

“I have no doubt that the agreement is deficient and this in reality was part of the cost of the credit.”

He added: “The agreement is bad and cannot be cured and that is the end.”

Mr Meadows, aged 45, and Mrs Meadows, aged 44, who have two children, took out the original loan to install central heating and convert a bathroom into a third bedroom to cater for their growing family.

London North Securities was attempting to take possession of the couple’s family home.