are Santander mortgage arrears charges and legal fees fair? FOS say they are!

tifo

I made a claim for a refund of arrears and (some) legal fees from Santander for my mortgage account. They refused to offer a refund and said their charges are fair and reasonable.

I passed the complaint to the FOS and it has not been passed to an Adjudicator.

The Adjudicator has asked many questions in relation to whether the bank treated me fairly whilst I was (am) in arrears and said he cannot look at the arrears charges/fees as he considers them to be fair at £35.00 a month (on top the interest they charge on these as part of the monthly mortgage payment on the whole balance) and quoted the 'test case' as one of his reasons. He said the FSA saying charges should cover admin fees is for them to regulate by and the FOS do not set market prices for any bank charges.

This means my complaint will not be investigated as i want it to be and I have around £5,000 of charges/fees including interest with more being added on every month.

What can i do as the Adjudicator has already made his mind up before even talking to the bank?

dunstonh

What can i do as the Adjudicator has already made his mind up before even talking to the bank?

Nothing. The charges have not been proven to be unfair and the FOS can only act within the law and FSA rules. The best they can do is make sure they have been applied correctly and that you have been treated fairly by the lender.

That typically means you usually end up with zilch being returned unless the bank agrees that you are in a hardship position and in a cycle of charges which you cannot exit. Even then its largely goodwill on their part.

tifo

dunstonh wrote: »

the FOS can only act within the law and FSA rules.

FSA MCOB 12.4.1 R "(1) A firm must ensure that any regulated mortgage contract that it enters into does not impose, and cannot be used to impose, a charge for arrears on a customer except where that charge is a reasonable estimate of the cost of the additional administration required as a result of the customer being in arrears".

The FOS is saying it costs the bank £35.00 per month when i am in arrears plus they make money on the extra interest. All i'm saying is i don't believe it costs them £35.00 per month plus about £10 in extra interest. Like bank charges, they must prove their admin costs.

Are you saying arrears charges are different to bank charges?

Why does the TEST CASE ON PERSONAL CURRENT ACCOUNT have to come into it? That did not look at mortgage contracts, did it?

dunstonh

All i'm saying is i don't believe it costs them £35.00 per month plus about £10 in extra interest.

If you disagree then are free to start a court case. The FOS won't. It's not within its remit.

There have been some cases where the lenders have been shown to charge too much. However, typically the amounts were higher and there was insufficient audit trail to back up what they said they were doing (many doubt it was made up anyway which is why the FSA took an interest). £35 is not a large amount in todays terms and once a month referral to a lending clerk (who is typically higher qualified than a bank clerk or has a higher responsibility - which in turn means more pay) means that the banks could actually find it easier to justify a £35 charge on mortgage arrears than they could with overdrafts.

Like bank charges, they must prove their admin costs.

Since when?

Are you saying arrears charges are different to bank charges?

No. Very similar.

Why does the TEST CASE ON PERSONAL CURRENT ACCOUNT have to come into it? That did not look at mortgage contracts, did it?

The principles can apply to them. However, it is not the role of the FOS to challenge the law. It is to follow the law.

tifo

dunstonh wrote: »

£35 is not a large amount in todays terms and once a month referral to a lending clerk.

However, it is not the role of the FOS to challenge the law. It is to follow the law.

£35.00 is a LOT of money for an automated response. I don't think a clerk actually looks at every account that's in arrears, that would mean millions of accounts to look at every month, and definately not every month for the same account. Unless the banks can show that a clerk on a certain pay scale looks at my account every month whilst it's in arrears.

Plus they are compensated by the extra interest they charge which is all they get on the principle balance anyway.

The FOS don't have to follow the law, i've had it many times. They have to be fair and reasonable. I've had decisions which were against established law because it seemed unfair on the bank so i lost out many times.

As for why banks need to show their admins costs, i'm sure you're aware of the FSA rule i referred to (on which you didn't comment) as well as UTCCRs and a consumer having to pay a higher sum in compensation than actual cost on a non-negotiated term and then there's common law precedents.

I don't believe the test case applies to mortgage accounts just as it doesn't to business accounts and credit card accounts or any other type of account other than personal current accounts.

dunstonh

£35.00 is a LOT of money for an automated response.

You assume its automated. Usually with mortgage arrears its not.

I don't think a clerk actually looks at every account that's in arrears, that would mean millions of accounts to look at every month, and definately not every month for the same account. Unless the banks can show that a clerk on a certain pay scale looks at my account every month whilst it's in arrears.

Only a minority are in arrears and the people employed to handle arrears and bad accounts are there only to do that.

Plus they are compensated by the extra interest they charge which is all they get on the principle balance anyway.

The interest is on the debt. They dont get all the interest, or even most of the interest as that has to be financed. In some cases, they dont get any of the interest.

The FOS don't have to follow the law, i've had it many times. They have to be fair and reasonable. I've had decisions which were against established law because it seemed unfair on the bank so i lost out many times.

The FOS do have to follow the law. However, they are typically more favourable than a court as they will consider fairness as well whereas a court wont.

As for why banks need to show their admins costs, i'm sure you're aware of the FSA rule i referred to (on which you didn't comment) as well as UTCCRs and a consumer having to pay a higher sum in compensation than actual cost on a non-negotiated term and then there's common law precedents.

If you dont agree then start a court case and see how you get on.

tifo

dunstonh wrote: »

The interest is on the debt. They dont get all the interest, or even most of the interest as that has to be financed. In some cases, they dont get any of the interest.

Please explain why the bank does not get all the interest on the mortgage they have given to me and which i pay them?

If they don't get the interest then they make money from the breach (as charges)?

dunstonh

Please explain why the bank does not get all the interest on the mortgage they have given to me and which i pay them?

Traditional lending is financed by savers. So, the money deposited by savers is lent out. The savers have to be paid their interest and the cost of running their accounts (and associated branch network etc) has to be covered. Typically, the net interest margin (as its called) is around 1.3%. It can be higher in periods of higher interest rates and its typically lower in periods of low interest rates.

The lenders that didnt have savers raised the money via money markets and institutional investors. In effect, the lenders were borrowing the money from them and lending it out again as mortgages. So, they only got the difference on the interest rates. During the credit boom peak, many mortgage deals made nothing on the interest rate as the cost of borrowing was the same to them as it was on the mortgage. The money earned was on the mortgage arrangement fees.

Some lenders didnt actually fix the cost of their debts and found that the amount being paid back on mortgages was less than they had to pay. In these cases, some lenders actually agreed to write off some of the mortgage to encourage people to take their borrowing elsewhere

If they don't get the interest then they make money from the breach (as charges)?

They are a commercial entity. Nothing wrong with that as long as what they make is reasonable and doesnt fall foul of what the FSA consider is reasonable. What the FSA feel is reasonable and what you probably feel is reasonable is quite far apart though.

_Andy_

How charming - the OP asks a question, doesn't like the (well-written, detailed) responses and starts arguing and can't be bothered to thank the person trying to help. Lovely.

tifo

_Andy_ wrote: »

How charming - the OP asks a question, doesn't like the (well-written, detailed) responses and starts arguing and can't be bothered to thank the person trying to help. Lovely.

Thanks for the comment.

It's not arguing but debating ....

tifo

dunstonh wrote: »

as long as what they make is reasonable and doesnt fall foul of what the FSA consider is reasonable. What the FSA feel is reasonable and what you probably feel is reasonable is quite far apart though.

Not at the moment. I am asking the FOS to enforce the FSA MCOB 12.4.1 Rule that arrears charges must reflect costs.