Mortgage Exit Fees successes and failures

dunstonh

Devonjem wrote: »

What are you talking about? I am not saying the bank should repay everything. Read my message - I asked for a breakdown of the fee, and they paid in full. I did not ask for a full refund. In fact I did not ask for any money. They chose to ignore my request for a breakdown and pay me everything. If for example they could justify £50, then I would have claimed the difference between 175 and 50.

My request for a breakdown is not blackmail, as has been suggested. People should read messages more carefully before ranting.

They dont have to justify it. It is not a penalty charge and doesnt have the same requirements. Often it is just easier to get rid of troublemakers fo rthe small amounts involved.

Steve_xx

dunstonh wrote: »

They dont have to justify it. It is not a penalty charge and doesnt have the same requirements. Often it is just easier to get rid of troublemakers fo rthe small amounts involved.

Why shouldn't they have to justify their charges?

Next you'll be saying that the banks are not responsible for the current debacle in the money markets.

Steve_xx

_Andy_ wrote: »

Yes and as a result of all the people doing so, we're all going to be paying for what is, essentially, you blackmailing the companies in question. Top work.

I feel so sorry for the banks. These huge institutions that have relentlessly and imprudently lent money to those who cannot possibly afford to pay it back, and during the course of their relentless lending antics they have driven the price of houses up to unsustainable levels.

Now of course the bubble has burst and yes, joe public is left to pick up the financial pieces of their shoddy modus operandi.

Who is blackmailing who here?

Devonjem

Wrong. If the bank faces a claim that a charge is unfair, and if the bank wants to defend the claim, then it will need to provide evidence in defence to show the whole fee is fair and reasonable. So it will have to justify the fee if a claim is made. If the bank is unable to do that, the bank will likely lose.

References to penalties are irrelevant. The fee obligation in the contract is not a penalty. However, the fee must be fair and reasonable, as this kind of mortgage contract is one where the banks have more knowledge than the average consumer, so the parties are not of equal bargining power. The law recognises that and will protect the consumer in consumer contracts. If the contractual obligation is deemed unfair by the court, then it will be unenforceable. It will be unfair if the fee bears no relation to the amount of work required to close the mortgage. It is precisely this kind of clause in a consumer contract, where one party has all the knowledge and the other knows nothing, where the court will look to ensure the clause is fair. If the bank is unable to show the whole charge to be fair and reasonable, then the "unfair bit" should be repaid.

Comments about blackmail and penalties are misplaced in the circumstances laid out in my original message. Also your reference to "troublemakers" is misplaced. If a party has a legitimate contract claim, then making the claim to the bank is entirely justified regardless of the size of the claim. The bank might view the claim as being made by a troublemaker, but the court would not. If the bank chooses to pay off the claimant, well that is the bank's choice, and it makes that choice because it knows it will lose in court. If banks were confident that the full charge was fair, then they would not pay anything and fight in court. They would only have to fight once and set a precedent to deter other claims. Why dont they do that - because they know they will lose.

MarkyMarkD

Whilst your legal logic sounds convincing, you are missing a key point.

The UTCCR does not apply to price-setting terms.

It is entirely open to any supplier to set any price they choose for the goods they supply. That price doesn't need to be "fair". It is not subject to UTCCR.

The mortgage exit fee is no less a price-setting term than the mortgage product fee. Neither fee needs to be "fair". Neither fee needs to reflect costs.

When the FSA issued their guidance on mortgage exit fees, they didn't simply forget to point out that fees should be fair, or that they shouldn't exceed £x, or any such thing. They considered the law and specifically did not state that there was any legal or regulatory problem with any level of fees - so long as the fee level was stated up front, and then not increased without good reason.

That is why it remains blackmail to continually pester lenders with spurious claims about the legality of their mortgage exit fees or with irrelevant requests for breakdowns of costs. As Dunstonh has stated, the fact that some lenders find it economically better value to pay off such persistent irritants doesn't make their claims any more valid.

Steve_xx

MarkyMarkD wrote: »

Whilst your legal logic sounds convincing, you are missing a key point.

The UTCCR does not apply to price-setting terms.

It is entirely open to any supplier to set any price they choose for the goods they supply. That price doesn't need to be "fair". It is not subject to UTCCR.

The mortgage exit fee is no less a price-setting term than the mortgage product fee. Neither fee needs to be "fair". Neither fee needs to reflect costs.

When the FSA issued their guidance on mortgage exit fees, they didn't simply forget to point out that fees should be fair, or that they shouldn't exceed £x, or any such thing. They considered the law and specifically did not state that there was any legal or regulatory problem with any level of fees - so long as the fee level was stated up front, and then not increased without good reason.

That is why it remains blackmail to continually pester lenders with spurious claims about the legality of their mortgage exit fees or with irrelevant requests for breakdowns of costs. As Dunstonh has stated, the fact that some lenders find it economically better value to pay off such persistent irritants doesn't make their claims any more valid.

It is not "blackmail" to invoke an available legal remedy. It is libellous to suggest that everyone who asks their lender to explain their policy on charging is a blackmailer.

Devonjem

First, there is no difference between a clause that sets a price, and any other clause in a consumer contract, when it comes to the application of the relevant legislation in regard to unfair contract terms. A price setting clause can just as easily fall foul of these rules, as any other contract clause.

Of course in a typical situation one would expect the parties to pay close attention to the price, appreciate all the factors that affect price and negotiate it carefully. By doing so, there would be a good argument that both sides were equal in their relative bargining positions and consequently that there should be no suggestion of the clause being unfair. That is not the case with the exit fee. The consumer has no information to help guage whether the fee is reasonable. It is not negotiated, not least of all as the consumer has no information to use to negotiate. Conversely, the bank knows in detail whether the fee is reasonable. The law will not treat this clause differently from any other just because its subject relates to a price.

I am not saying, as you suggest I am, that there is a requirement that a clause (be it price or whatever) must be fair. Parties can agree whatever they like, including the price. What I am saying is that in consumer contracts, where the parties are of unequal bargining power, the law will ensure that the clause is reasonable. That law applies to the clause dealing with the exit fee.

The FSA's comments are just that, comments. They are not meant to be a pronouncement of what the applicable law is in all its detail. The fact that the FSA did not say something, does not mean that the converse is a legal certainty, as you are suggesting.

It is silly to suggest it is blackmail for a consumer to ask a bank to breadown its fee. Obviously it is not. A request for information cannot constitute blackmail. If it did, then decades ago banks (and any other body that received a request for information in regard to a charge) would have taken legal action to stop it and there would be millions of us with criminal records. Also, no one who has a sound legal position should be susceptible to blackmail. If you have a sound legal position, then you fight, and the banks would be the first to do that. Fight and set a precedent. The reason banks pay is not simply because a legal fight is more costly. A legal fight would cost a fraction of what they are paying voluntarily, and as I have said, they would only have to fight once. So what are the banks doing? They know they will lose a fight but do not want a binding precedent against them, which will ultimately cost them more.

I cannot add anything more to this discussion so good luck to you all.

MarkyMarkD

Devonjem wrote: »

Of course in a typical situation one would expect the parties to pay close attention to the price, appreciate all the factors that affect price and negotiate it carefully. By doing so, there would be a good argument that both sides were equal in their relative bargining positions and consequently that there should be no suggestion of the clause being unfair. That is not the case with the exit fee. The consumer has no information to help guage whether the fee is reasonable. It is not negotiated, not least of all as the consumer has no information to use to negotiate.

That's complete rubbish.

The MEAF is stated up front in the Key Facts Illustration which every lender has been required by law to provide since 2004. It can be easily compared between providers.

In this regard it is no different to the price in Tesco for a tin of baked beans, which can be easily compared to the price in Sainsbury's or ALDI.

Hence it is a price-setting term and is not subject to UTCCR.

The blackmail is to suggest that a spurious claim will be pursued to FOS, in the knowledge that the lender is likely to settle the claim for economic reasons. I'm not hung up on the "blackmail" word - will "threat" do or perhaps "obtaining money with menaces"? Whatever word is used, in most of the cases we are referring to the claimant has pursued an invalid claim and obtained money they are not legally, or morally, entitled to. That's wrong.

Devonjem

Wrong again. Price setting terms are not automatically excluded from the operation of the relevant legislation. To a certain extent, core terms are excluded from the fairness test (I assume you are referring to that). What is a core term - a term that is genuinely central to the bargin. Is a MEAF clause genuinely central to the mortgage contract - of course not. Central terms are repayment period, interest rate, parties etc. On the other hand, the exit fee is something of a boilerplate clause.

Your analogy to baked beans is nonsense. The point is that until recently most banks were adopting the same practice of including unreasonably high fees in their contracts. So what good is it to compare a £300 Barclays charge with a £300 Lloyds charge, if the Lloyds charge is also unfair? The fact that other banks charge similar figures does not make Barclays' charge fair, does it. A court would not find that a consumer cannot successfully challenge an unfair fee because the consumer should have compared the fee with other banks who were charging similar unfair fees. You dont justify a fee by saying to the customer "look, that other bank is doing the same thing". You justify a fee by showing what work you do to earn it.

So, making comparisons does not help. Indeed your own baked beans analogy might help me to explain the point. Remember the OFT's investigation into the big 4 supermarkets for price fixing earlier this year? The consumer knew the price of a tin of beans before he bought it at Tesco, and according to you he cannot complain as he could have compared the price at Asda and would have seen the same or similar price. According to you, thats as far as you need to go - you are saying that if Asda's price is similar to Tesco's, then the supermarkets are right and the consumer is wrong, regardless of what the price actually is that they are charging for the beans. Well, the OFT disagrees with you. The OFT said the supermarkets colluded to rip off the consumer, and that obviously was unlawful. That, until recently, equally applies to the banks and their exit fees.

Conclusion - just because other banks charge similar unfair fees does not make it alright. At the time the mortgage contract is made, the consumer has no idea if the fee is fair. Only the bank knows that.

Asking a bank to explain its fee is not blackmail or anything similar. It is a legitimate request. If the bank is unable to explain its fee, it is going to lose in court if a claim is made, and the bank knows it.

Sonar_Bender

Hi Martin :money: ,

Many thanks for your advice. I contacted Abbey National about our previous mortgage, had to fill in a form, received in the post yesterday a cheque for £130, brilliant.

Once again Martin many thanks.

Regards

John :rotfl: