ALBA 2007 – 1 plc - Irish Stock Exchange

(b)
(c)
the borrower is liable to pay interest, or any early repayment charge or other charge for credit
under the cancelled agreement, only if the borrower received certain prescribed information at
the prescribed time and if other conditions are met; and
any security is to be treated as never having had effect for the cancelled agreement.
Unfair Terms in Consumer Contracts Regulations 1994 and 1999
The 1999 Regulations and (in so far as applicable) the Unfair Terms in Consumer Contracts
Regulations 1994 (together with the 1999 Regulations, the "UTCCR") apply to agreements made on or
after 1 July 1995 and affect all or almost all of the Mortgage Loans. The UTCCR provide that (a) a
consumer may challenge a standard term in an agreement on the basis that it is "unfair" within the
UTCCR and therefore not binding on the consumer and (b) the OFT, the FSA and any other
"qualifying body" may seek to enjoin a business against relying on unfair terms, although the rest of the
agreement will remain enforceable if it is capable of continuing in existence without the relevant unfair
term.
This will not generally affect "core terms", which set out the main subject-matter of the contract (for
example, the borrower's obligation to repay the principal), but may affect terms deemed to be ancillary
terms, which may well include the ability to choose a substitute for LIBOR or Bank of England repo
rate (as applicable) where LIBOR or Bank of England repo rate (as applicable) cannot be determined
under the Mortgage Loan and other terms the application of which are in the lender's discretion, or the
ability to impose a charge upon repayment by reference to the Mortgage Early Repayment Charges.
Where a term for interest variation does not provide for precise and immediate tracking of an external
rate outside the lender's control, and if the borrower is locked in, for example by an early repayment
charge that is considered to be a penalty, the term is likely to be regarded as unfair under the UTCCR
unless the lender (i) notifies the affected borrower in writing at least 30 days before the rate change and
(ii) permits the affected borrower to repay the whole loan during the next three months after the rate
change, without paying the early repayment charge. See "Servicing and Special Servicing of the
Mortgage Pool – Repayment".
If a term imposing a charge upon redemption by reference to the Mortgage Early Repayment Charges is
unfair, the Borrower will not be liable to pay the charge or, to the extent that he has paid it, will be
able, as against the Seller or any assignee such as the Issuer, to claim restitution of the amount or to set
off the amount of such claim against the amount owing by the Borrower under the relevant Mortgage
Loan or any other mortgage loan that the Borrower has taken. Any such non-recovery, claim or set-off
may adversely affect the ability of the Issuer to make payments to the Noteholders and
Instrumentholders.
In August 2002, the Law Commission and the Scottish Law Commission issued a joint consultation on
proposals to consolidate the Unfair Contract Terms Act 1977 and the 1999 Regulations into a single
piece of legislation, and a final report, together with a draft bill on unfair terms, was published in
February 2005. It is not proposed that there should be any significant increase in the extent of controls
over terms in consumer contracts. Some changes are proposed, however, such as that (a) a consumer
may also challenge a negotiated term in an agreement on the basis that it is unfair and unreasonable
within the legislation and therefore not binding on the consumer and (b) in any challenge by a consumer
(but not by the OFT, the FSA or any other qualifying body) of a standard term or a negotiated term,
the burden of proof lies on the lender to show that the term is fair and reasonable. It is too early to tell
how the proposals, if enacted, would affect the Mortgage Loans.