Saturday October 30, 2004

Court wipes out ‘high’ home loan

LONDON: A court in the west of England has wiped out a debt taken out to fund a home improvement that rose to 67 times the original amount over 15 years, in a ruling that Britain's press saw yesterday as having profound implications for lenders to high-risk borrowers.

Judge Nigel Howarth, sitting at Southport County Court near Liverpool, said: “The combination of factors is so potentially exorbitant that it is grossly so and does grossly contravene the ordinary principles of fair dealing.”

In 1989 Tony and Michelle Meadows took out a loan of £5,750 (RM39,988) to fund installing central heating and converting a bathroom.

As high-risk borrowers, they agreed an annual interest rate of 34.9% with the original lenders, Home Loan Northern.

Interest, missed payments and costs saw the loan spiral to £384,000 (RM2.67mil) 15 years later, by which time the debt had been sold on to London North Securities, a debt collection agency.

The couple faced having their home repossessed.

Childminder Michelle Meadows, 44, said afterwards: “I can't get my head around it, I'm in a dream.”

Tony Meadows, a salesman, 45, added: “It wasn't a wanton spending spree we went on back then, it was just something we had to do at the time. I would advise people thinking of taking a loan to read the small print very carefully.”

District Judge Sabi Hasan, the presiding judge at Central London County Court, said judges might make similar decisions, depending on the circumstances of the case. – dpa