Law Report: Advertised interest rates correct: National Westminster Bank plc v Devon County Council. Devon CC v Abbey National plc - Queen's Bench Divisional Court (Lord Justice Kennedy and Mr Justice Macpherson) 25 June 1993.

In calculating, for the purposes of an advertisement, the annual percentage rate (APR) on a fixed rate mortgage, for which the interest rate was fixed for an initial period but then changed to another fixed rate or reverted to the current fluctuating rate, a lender was entitled to assume that the interest rate would remain the same throughout and to base the APR on the initial fixed rate, not on the fluctuating rate.

The Queen's Bench Divisional Court allowed National Westminster Bank plc's appeal against convictions at Plymouth magistrates' court for conveying misleading information in an advertisement, contrary to section 46 of the Consumer Credit Act 1974, and for contravening consumer credit regulations contrary to section 167(2). The court dismissed Devon County Council's appeal against the dismissal, by the same magistrates' court, of similar charges under section 46, against Abbey National plc.

Timothy Walker QC and Thomas Keith (Osborne Clarke, Bristol) for National Westminster; Anthony Scrivener QC and Martin Meeke (Philip Jenkinson, Exeter) for Devon CC; Michael Beloff QC and Nicholas Paines (Deborah Henning, Milton Keynes) for Abbey National.

LORD JUSTICE KENNEDY, giving the judgment of the court, said for some time banks and building societies had offered fixed rate mortgages, where the rate of interest was fixed for an initial period of, say, two years, after which it reverted to the normal fluctuating rate. Cons umer protection law required advertisements to set out not only the initial interest rate but also the APR for the whole term.

Among the applicable regulations was regulation 2 of the Consumer Credit (Total Charge for Credit) Regulations 1980 (SI 51) which required any calculation under the regulations to be made on certain assumptions, including, under regulation 2(1)(d): 'In the case of a transaction which provides for variation of the rate or amount of any item included in the total charge for credit in consequence of the occurrence after the relevant date of any event, the assumption that the event will not occur: and, in this sub-paragraph, 'event' means an act or omission of the debtor or of the creditor or any other event (including where the transaction makes provision for variation upon the continuation of any circumstance, the continuation of that circumstance) but does not include an event which is certain to occur and of which the date of occurrence, or the earliest date of occurrence, can be ascertained at the date of the making of the agreement.'

Applying this assumption, National Westminster and Abbey National calculated their APR by treating the initial fixed rate as though it would be the rate payable for the whole mortage period and would not change at the end of the fixed- rate period. But Devon's trading standards officer took the view that the APR should have been calculated on the basis that the interest rate after the initial fixed rate period would be the fluctuating rate being offered by the lender at the outset.

In their lordships' judgment, the transaction provided for a variation of the interest rate after the initial fixed period, but not 'in consequence of' an event that was certain to occur, namely a change of interest rate, because of the possibility that at the end of the fixed rate period the rate would remain the same.

Thus the end of the fixed rate period was an event which was certain to occur and of which the date could be ascertained at the outset, but it was not an event in consequence of which the borrower would necessarily pay a different rate. So the lender was required to calculate the APR on the assumption that a change of interest rate would not occur.

It followed that National Westminster and Abbey National had correctly calculated the APR in their advertisements.

Devon argued that such an interpretation thwarted the purpose of the legislation, which was to require lenders to advertise their offers in such a way as to enable potential borrowers to make valid comparisons.

But when the tortuous working of regulation 2(1)(d) was unravelled and applied to the type of transaction concerned, it eventually became clear that the lenders' interpretation was correct. Moreover, there were many types of transaction to which regulation 2(1)(d) could be applied with different results.

Finally, these were criminal charges and the prosecution was not entitled to ask this or any other court to adopt a 'purposeful' construction which went beyond the statutory words.

Start your day with The Independent, sign up for daily news emails
News
election 2015The 10 best quotes of the campaign
News
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
News
people
Voices
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Marketing Manager (B2B) - Romford - £40,000 + car

£35000 - £40000 per annum + car and benefits: Ashdown Group: Marketing Manager...

Ashdown Group: Helpdesk Analyst - Devon - £20,000

£18000 - £20000 per annum: Ashdown Group: Helpdesk Analyst - Devon - £20,000 ...

Ashdown Group: Data Scientist - London - £50,000 + bonus

£35000 - £50000 per annum + generous bonus: Ashdown Group: Business Analytics ...

Ashdown Group: IT Project Coordinator (Software Development) - Kingston

£45000 - £50000 per annum: Ashdown Group: IT Project Coordinator (Software Dev...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'