High Court says bank penalty interest charges unenforceable

[Brendan Burgess]

High Court Finds that 9% Surcharge Interest Rate Offends the Rule Against Penalty Clauses

High Court reaffirms that surcharge interest rates that are 'extravagant and unconscionable' and not commercially justifiable are not legally enforceable.

www.williamfry.com

I don't remember seeing this at the time so I am noting it here in case it becomes relevant again.

Just to be clear - a lender can charge 10% interest on a variable mortgage if they want to. There is no restriction.

What they cannot do is to charge an additional penalty interest on arrears.

The last lender to do that for home loans was the Irish Nationwide but they stopped doing it 20 years ago.

 

[Bronte]

Just to be clear - a lender can charge 10% interest on a variable mortgage if they want to. There is no restriction.

What they cannot do is to charge an additional penalty interest on arrears.

So the lender can get around this by bumping up the variable interest rate?

 

[Brendan Burgess]

In theory they could. But as most don't charge penalty interest, it does not arise.

 

[CorkHome2022]

Did not the CPC not stop the practice of "penalty interest" and making an arrears matter even worse.
As regards the interest rate yes the lender can charge what they want with the exception of ECB linked trackers but they would not be open for very long as people would switch .

 

[Brendan Burgess]

Did not the CPC not stop the practice of "penalty interest" and making an arrears matter even worse.

The Code of Conduct on Mortgage Arrears did but it only applies to borrowers within the MARP.

If you are outside MARP, the CCMA wouldn't stop them charging you penalty interest. But the law does now.