Product Arrangement Fees - Unfair?

noisla

I applied for a mortgage last October, paid the product arrangement fee of £600 and then the buyer pulled out at the last minute. As I didn't find a similar property requiring a similar mortgage and complete within 3 months, the product expired and I lost my fee. I was pretty gutted about this but thought that it was unavoidable.

However, I have recently spoken to a mortgage adviser friend who pointed out that I should have added the fee to my mortgage, and then I wouldn't have lost it. (I feel stupid for not thinking about this at the time.)

I was wondering if there was any grounds on which to reclaim the fee as the whole thing seems really unfair. For example, they haven't actually arranged anything for me - I've paid and received no service in return. In other industries if you paid a deposit and the goods weren't delivered, you'd get your deposit back. It also seems unfair that altering the date on which you want to repay the fee determines whether or not you lose money.

This is clearly a general question about product arrangement fees - any got any thoughts? I know that banking charges as unfair failed in the courts.

I see that the same company now describes the fee as a fee to "secure" the product/advertised rate, and they charge a separate booking fee which must be paid upfront regardless. This seems a little clearer and fairer.

BadgerFace_2

The fee was for them to 'hold' that pot of money for you, which you then didn't use...but they still had that money reserved for you for 3 months.

Even if you had added the product fee to the loan, they (certainly some lenders) still reserve the right to come after you for it if you then don't complete. I'm not sure whether they would or not though.

Hey, worth a try though if I was you. You might get a goodwill gesture.

betmunch

Its fair because they told you about it in the KFI, and likely offered you the chance to add it to the loan as well. The KFI would have also said it was non-refundable.

As a general rule of thumb, if you are told about something then its considered fair.

Senior_Paper_Monitor

You didn't pay 'a deposit' - you paid the cost of administration through to offer (it wasn't the lender's fault the deal you set up fell through either) - and, as Mr Badger points out, holding the money available but unused.

The terms of application fees/admin fees/product arrangements fees vary by lender but it is qite likely that what your 'mortgage broker friend' says is 100% correct - at level of fee in this case I think it probable.

So despite having a mortgage broker friend, you opted to process this yourself and did not use the terms/conditions to your benefit (again not the lenders fault).

I don't think you have any grounds to demand (be entitled to a refund) but a nice letter 'may' receive consideration.

The 'new terms' that you describe seem to indicate that the fee is now payable in two bites (but certainly before offer for the second part as it is to secure the product/rate) therefore without knowing exactly what product was involved I cannot comment further as to how you have done it/should have done it. Part of the job of a broker is to match the terms and conditions of the mortgage (at all stages) to the client's circumstances - this would include be careful about risking 'fees' where the deal was risky, dependent on valuation and or other circumstances etc (and fully explain any such risks to the client in advance).

GMS

Are you sure this was an arrangement fee and not a booking or valuation fee?

If there was an option to add to the mortgage then it should not have been paid until completion.

Check your KFI to see exactly what it was stated as.

noisla

The point about holding the funds sounds logical. In conclusion, I was a bit stupid!

However, I don't agree that if you're told about something then it's fair though, otherwise the statutes surrounding unfair terms in contracts would be ineffective. And often they have you over a barrell, particularly if all lenders/sellers/providers operate similarly, and/or you're blinded by technical detail in agreeing to something. (Not saying for this case here, just as a general point.)

Thanks for the responses

noisla

It was definitely an arrangement fee.

I paid a separate valuation fee and there was no booking fee. The bank now has separate booking fees in addition, but this wasn't the case when I made the agreement last year.

Actually now you mention it, they might have said something about not needing to pay right away... but presumably I would have had to pay it on completion or on the whole thing falling through? I will go back and check the Key Facts document.

betmunch

noisla wrote: »

The point about holding the funds sounds logical. In conclusion, I was a bit stupid!

However, I don't agree that if you're told about something then it's fair though, otherwise the statutes surrounding unfair terms in contracts would be ineffective. And often they have you over a barrell, particularly if all lenders/sellers/providers operate similarly, and/or you're blinded by technical detail in agreeing to something. (Not saying for this case here, just as a general point.)

Thanks for the responses

I think your being a bit harsh on yourself saying you were stupid, perhaps inexperienced would be a better word.

It would be interesting if you were to challenge the fee as being unfair from the unfair contracts angle as I have no knowledge of this. I can tell you there is no way it would considered as unfair by the FSA if you have been told about it and you decided to proceed anyway. Thats the way the FSA have set things up.

valten

I've got my first Mortgage application going through at the moment and the arrangement fee has been added to the loan. At first I though this was a bit odd as I had already budgeted for it and could pay it up front.

Having read this I'm rather glad they did it that way.

Bad luck. I don't think you can blame yourself though, it wouldn’t have occurred to me either.