HFS Loans Ltd has agreed to fairer terms and conditions in its interest-back loan agreements following action by the OFT.
Under the HFS interest-back scheme customers could borrow up to £25,000, with the interest paid refunded after the five year loan period – subject to a maximum refund of £4,000 – provided that the borrower fulfils certain conditions. This month is the fifth anniversary of the launch of the scheme and borrowers are therefore only now becoming eligible for refunds.
The OFT considered that some of the conditions that claimants had to meet to get a refund were unfair and took action under the 1999 Unfair Terms in Consumer Contracts Regulations. HFS then agreed to make changes that will benefit the 12,000 customers who have taken out interest-back loans since January 1998 by making the process for reclaiming interest fairer.
John Vickers, director general of the OFT, says: “It is important that consumers who sign up for interest-back loans get a fair deal. These changes will help ensure that the thousands of customers who signed up for this scheme are not prevented from making a valid claim by having to comply with unfair formalities.”
HFS has changed procedures used for registration for schemes, refund claims, document retention and arrears rules, following the OFT's findings. The company has also written to all borrowers who applied to be registered under the interest back scheme, but were declined at registration. Borrowers will be advised that they will now be accepted onto the scheme and will be eligible to claim under the conditions applicable to existing scheme members.