Reclaim excessive mortgage arrears fees, borrowers urged
in Reclaiming mortgage fees, council tax, etc
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messing me around.
This article should make it clear that unlike bank charges court action should not be taken for the following reasons;
a) Due to indemnity clauses in most mortgages are liable for all the mortgage companies legal expenses in relation to any claim you make.
b) Courts are not inclined to let mortages cases remain in small claims court and will move it to fast or multi track system, regardless of amount of claim (my claim was approx £5000 including court fees and statutory interest).
As regards the ombudsman having tried this myself it was unsuccessful in my case.
ps for info my mortgage was with the chelsea building society, claiming approx £5000 for mortgage arrears and charges.
Do I need to do a S.A.R - (Subject Access Request)?
Yes do a full S.A.R - (Subject Access Request) for all the information the mortgage provider holds on you. Including any instances of manual intervention. It is important you have as much information as possible.
How do I claim?
The same basic process applicable to bank charges applies in that you send a preliminary letter asking for a breakdown of charges, followed by an LBA after 14 days. After a further 14 days issue a claim either through MCOL or via N1:
It is recommended that you use the N1 route as MCOL is quite limiting in the wording that you can use.
What charges can I claim from a mortgage account?
It is still early days in relation to mortgage claims but as a basic rule you can claim for excessive charges which relate to a breach of contract.
Here are some examples of charges which have been successfully claimed:
Late payment charges
Returned direct debit charges
Admin charges for closing a mortgage
Deeds dispatch fee - note it is quite likley that these will no longer be successful following the ruling in Smith v ME that there is no breach of contract where you end a mortgage before the contractually agreed date.
NB Different companies may give the charges different names.
Also note none of these claims actually went to court and therefore there is no precedent set regarding whether these charges are lawful or unlawful. There is therefore no guarantee that your claim will be successful. You should not commence action unless you are happy to argue your case in court.
PLEASE NOTE AN ERC CLAIM HAS BEEN LOST IN COURT AND TWO ERC CLAIMS HAVE BEEN STRUCK OUT BY THE COURT
A CLAIM FOR CHARGES HAS ALSO BEEN LOST AND ANOTHER STRUCK OUT.
You can not claim:
Interest normally due on the mortgage
Fees for arranging your own insurance
Higher lending charge
Early redemption charge
Should I make a claim against my current lender?
It is suggested that you exercise caution against claiming against your current lender. Whilst they can not terminate your mortgage in response to a claim (they would have to get a court order first) you may require them to be sympathetic in the future if you get into difficulties. However, with some of the more ruthless sub prime lenders, (you know who they are!) they may afford little sympathy in any event and therefore you may conclude that it is worthwhile pursuing them. This is entirely your own decision which you will be best placed to decide.
My claim is more than 5k/15k what are the implications?
The Civil Justice System divides claims into three tracks to decide which court will hear the case:
Small Claims Track - claims under £5K- heard in small claims court
Fast Track - claims £5-15K- Heard in the county court
Multi -Track - Claim over 15k or claims of lower value but greater complexity. Can be heard in either the County or the High Court.
Once you have filed your claim in court and the mortgage provider files their defence this will raise the track allocation process. There is some discretion to allow higher claims to go to a different track particularly if it is a consumer issue as the small claims is basically designed to be a consumer court. You can state your preference for the small claims court in your allocation questionnaire, but the judge will also take into account the wishes of the defendant. There may be an allocation hearing either by phone or by attending court.
There are different rules and procedures which operate in each court. So with small claims, the parties can not claim their legal costs from the losing party and rules on disclosure are limited. The use of lawyers is discouraged and the court is specifically designed for consumers who are not fully conversant with the legal process.
In the fast track fixed costs can be claimed by the winning party. With the multi - track all legal costs can be claimed by the winning party. There are no fixed costs. Only barristers or solicitors with extended rights of audience can represent in the High court which generally means employing two lawyers. Costs can therefore escalate considerably.
NB IF YOUR MORTGAGE CONTAINS A CLAUSE WHEREBY YOU INDEMNIFY THEM FOR LEGAL COSTS YOU MAY STILL BE LIABLE FOR THEIR COSTS EVEN IF YOU ARE ALLOCATED TO THE SMALL CLAIMS TRACK AND EVEN IF YOU WIN. THIS CAN APPLY EVEN WHERE THE COSTS ARE GREATER THAN THE VALUE OF THE CLAIM.
The court has told me I must attend an allocation hearing what arguments can I use?
1.It is a consumer dispute and should be allocated to the small claims court which is designed particularly for consumers.
2.Under the overriding objectives of the Civil Procedure Rules there is an obligation on the judge to ensure the parties are placed on an equal footing. As the defendant is a huge financial institution it would be unfair to place this in the fast track as they would have the advantage in being able to bear the risk of costs whereas you do not.
3.The points of law relied upon are well established and settled law with no complex issues of interpretation. There is thus no need for it to go to the County Court/High court.
The claim is well below the 5K threshold. You filed the claim believing it would be dealt with in the small claims court and did not anticipate the risk of bearing the costs in the Fast Track. So to transfer to fast track would be grossly unfair.
You filed the claim believing it would be dealt with in the fast track and did not anticipate the risk of bearing the costs in the Multi Track. So to transfer to Multi track would be grossly unfair.
5. Whilst you have repeatedly tried to contact the defendant to resolve the issue, they have failed to respond to any communication, they have refused your request for a breakdown of their costs in order to satisfy you that their ERC was lawful.
6. You believe fully in the justice of your case and if it is to be transferred to the Fast /Multi-track request the court orders that no costs order will be made against you.
Are secured loans the same as mortgages?
Secured loans over £25K are exactly the same as mortgages
Secured loans under £25K are generally governed by the Consumer Credit Act of 1974 (with the exception of those offered by Building Societies or Local Authorities).
For secured loans governed by the CCA 1974, Regulations set out the amount payable on redemption. The courts therefore can not interfere with an ERC calculated in accordance with these Regulations.
If your secured loan is governed by CCA 1974 (not all will be check out s.16 for exempt agreements) then s.95 (1) entitles you to a rebate of charges to credit.
http://www.passprotect.studio400 .m...Act_1974. PDF
The Consumer Credit (settlement Information) Regulations 1983 requires the creditor to give a statement of amount required to pay off the loan and how this was calculated. The Consumer Credit (Early Settlement) Regulations 2004 (see link below) regulates the calculations and these cannot be contracted out of to the detriment of the consumer (s.173 (1) CCA). So an ERC which requires payment over that provided for in the Regs would be classed contracting out of the Regulations to the detriment of the consumer.
The Consumer Credit (Early Settlement) Regulations 2004
These Regulations only apply to loan agreements taken out since 31st May 2005. These Regulations replace Consumer Credit (Rebate on Early Settlement) Regulations 1983 which contained similar provisions. Trading Standards have software which can check the calculations provided by a loan company. It’s often referred to as rule 78.
The Consumer Credit Act 2006 will lift the 25K limit on loans on 6th April 2008.
How long can I claim back for on mortgages?
S.20 Limitation Act 1980 provides that the time limit for actions to recover money secured by a mortgage or charge or to recover proceeds of the sale of land
(1) No action shall be brought to recover--
(a) any principal sum of money secured by a mortgage or
other charge on property (whether real or personal); or
(b) proceeds of the sale of land;
after the expiration of twelve years from the date on which the right
to receive the money accrued.
This means that if any charges have been added to the principal sum you can claim back 12 years. However, be careful as unless any charges have been capitalised they have not been made part of the principal sum and therefore the normal 6 years will apply.
If you are wishing to claim back fees beyond 6 years which have not been added to the principal sum you would need to invoke s. 32 of the Limitation Act. It is suggested that you only do this if you are fully prepared to research and fully understand the implications before commencing on any court action.
What interest can I claim?
1. Interest that you have been charged in relation to the unlawful charges
If you are claiming late fees and these were added to your mortgage balance as oppose to paying these as they arise then you would have paid interest on these fees at the contractual rate you can claim this. If you are claiming fees which were applied on terminating the mortgage you would not have paid interest on these.
2. Contractual or statutory from the date of payment of the charges.
You are entitled to claim statutory interest at 8% from the date the charges were paid.
Some people have chosen to claim the contractual rate of interest in lieu of the statutory interest (NB you can not claim both). This may be advantageous as the contractual rate is compounded whereas the statutory is simple interest. There is however, no absolute right to contractual interest and is available at the discretion of the court. If you do decide to claim contractual rate in lieu of statutory interest always give the statutory rate as an alternative.
My mortgage provider is seeking repossession what can I do?
Seek legal advice! Where your home is at risk this is beyond the scope of a self help forum, although some pointers to be aware of:
A mortgage provider can not evict you without a possession order from the court. If you leave without having received a possession order they need not obtain a possession order and can go straight for a sale order.
If they apply to court for possession you can rely on s.36 (2)(b) of the Administration of Justice Act 1970 which allows the court to suspend the possession order for such a term as the court considers reasonable. If the debtor can repay with in the reasonable time no possession order is granted.
Under s8 AJA 1973 in exercising the powers under s.36(2)(b) the court only has to consider the sums payable in arrears not any term which may render the full amount repayable.
What amounts to a reasonable period will depend on the circumstances of the case and can include the whole remaining term of the mortgage as occurred in Cheltenham & Gloucester v Norgan. This case also stated the factors the court will take into account when deciding what is reasonable:
Ability to make payments now and in the future
Likely duration of financial difficulty
Reason for arrears
The period of agreement remaining
So basically if you can show you can pay off the arrears over the remaining period the court will not order possession.
Further info on mortgage arrears can be found here:
said they could charge up to £600 in a recent mistake letter
The reason I ask is that I have a sub-prime mortgage with GMAC (I was self-employed at the time of taking out the mortgage). A couple of years ago, I got into trouble meeting the repayments when my business went through a very sticky patch. I did exactly what you think you should do - immediately contact the lender and explained the situation honestly, and tried to negotiate with them.
They were reasonably helpful for about a fortnight, then they lost all patience. They charged me £30 for the returned direct debit. When I cancelled the direct debit to avoid this fee in future and paid directly into their bank account over the counter, they charged me £15 per month for the priviledge of doing so. I figured this was better than £30 for the DD fee. I paid what I could as soon as I could, but 4 months into the problems, I was 2 1/2 months in arrears. They charged me £100 to instruct their solicitors and £85 in other charges. I paid them a lump sum borrowed from a friend, supposedly to keep them off my back while I sold my business, and reinstated my direct debit. By now, I only owed them just over a months' worth of payments. They then slapped £565.25 in solicitors fees on. By now, I had a job and had agreed to pay them my full monthly payment and an extra £50 a month towards the arrears, but they still chargd me £50 a month for being in arrears for the next 5 months, even though I never again missed a payment and stuck to the agreement to the letter.
We're 2 years on now, and my mortgage is up to date and ticking along fine. I've never missed a penny in payment since. However, I calculate that they charged me a total of £1270.25 over this period, which was more than I was ever in arrears by at any point.
I'm still with the same company and, owing to the random way the deal worked, I'm only paying 2.45% interest, which I'm unlikely to get anywhere else. I'm also unlikely to get a mortgage anywhere else at all at the moment, as this will all still be on file for a couple of years yet. Therefore I don't want to put myself in a position where the lender could 'throw a wobbly' and cancel my mortgage.
However, this seems like a lot of money to be charged for what amounts to half a dozen letters and phone calls. Nothing went to court (although court papers were issued and then cancelled when I paid the lump sum), no-one came to visit on those 'counselling' interviews that have been spoken about. I wouldn't take this to court (after looking at the advice above concerning the court system). However, is it worth contacting them and making a complaint (which they'll reply to with words to the effect of 'tough - that's what we charge' - this is GE, after all!), before taking it down the FoS route?
What would any of you folk do in my shoes?
They will send all information they have on your account.