Mortgage Exit Fees successes and failures

Charis

I am hoping to repay my mortgage in December, twelve years early. I will not be charged an early repayment fee as I made it clear at the time that I wanted to be able to pay chunks off if I could. I have that agreed by the Building Society in writing. What I do not have is any record at all of the exit fee. It is not in my original loan agreement. I phoned C&G head office and was told it will be £90. The clerk told me it is on my annual statement each year.

Upon checking, I find that it is not on the first two statements. On the next it appears as £180 then on the last three up to last December appears as £225. It seems they have had to readjust downwards but should I have had a record of the new figure of £90 somewhere in the original documentation? There is not a mention of any exit fee at all apart from a small suggestion in one of the leaflets they gave me (although not on the mortgage offer itself) that there may be a charge, but no figure given. I suppose I should consider myself lucky but as there is no evidence of the proposed charge is it worth challenging it?

dunstonh

You see? Price/profit is not MEAF.

You are reading that totally wrong. The FSA did not want the charge to include lost profit. It does allow the transaction itself to include a margin for profit within that transaction alone. Just not cross-subsidising or being used as a way to recover lost profits or put people off from changing.

Every charge is allowed to have an element of profit within it.

You are also taking the wrong parts of Marks comments. Its all very well you asking for a breakdown. However, it doesnt matter if the provider wants to give that to you or not. There is nothing wrong with asking for one though.

Its the point where people say something along the lines "if you dont refund me in full I will take my complaint to the FOS". That is the blackmail. The FOS wont uphold the complaint as the bank is doing nothing wrong and complying with FSA rules. However, the FOS complaint will cost the bank £450 plus admin costs. When you are asking for £50-£100 back and threatening the bank with an alterantive that costs £450 then that is blackmail.

Karin_2

Hi,
I have just spoken to Kensington Mortgages regarding a mortgage redemption in 2005. I took out the mortgage in 2004, I no longer have the mortgage account number, but they found the information. I paid over £17,000, and they are saying that the contract states that if I repaid the mortgage before 3years then the charge would be 6% of outstanding balance, and they refuse to consider any further discussion. Can anyone give me advice.

Devonjem

I am not reading it wrong at all. If I was, then the FSA would agree with Markymark and say that the "price-setting" provision in the UTCCR applies and the MEAF clause would not be subject to the fairness test - and that would be an end to it. But rather, the FSA, in a detailed discussion of the fairness of MEAFs and application of the UTCCR, dont say that, but say the opposite. Further the FSA expressly states that the UTCCR provision that the bank might look to for help would be that provision relating to core terms (as i mentioned) - and the FSA made no comment on whether the bank might succeed on that argument.

So the point you make is not relevant in the context of determining whether or not the fairness test applies. The only relevance of references to profit is to determine the applicablilty of the fairness test in UTCCR - nothing else.

In your last para you clarify what you mean by blackmail. Go back to my very first message. I am not doing what you say in your last paragraph. I just asked for a breakdown. Rather than give me the detail i requested, the bank paid in full even though I asked for no payment. I explained all of this in the first email. Of course its not blackmail.

But some on this board say it is, and I have an issue with that. I am not taking the wrong parts of Markymark's message at all - he has been clear. I am not advocating generally for any position against banks, rather I am advocating for my particular circumstances as set out in the first message.

You can ask banks to breadown their fee. And if they have made it clear to you this is an admin charge but they cannot justify 300 or whatever, you have a claim for the balance - i.e. the difference between what they charge and what they can justify.

What I did is not blackmail, and to suggest it is, as some have done, in a public forum is libellous.

dunstonh

Karin wrote: »

Hi,
I have just spoken to Kensington Mortgages regarding a mortgage redemption in 2005. I took out the mortgage in 2004, I no longer have the mortgage account number, but they found the information. I paid over £17,000, and they are saying that the contract states that if I repaid the mortgage before 3years then the charge would be 6% of outstanding balance, and they refuse to consider any further discussion. Can anyone give me advice.

That charge sounds like an early repayment charge. These are legal and fair contract events.

They exist because you bought a mortgage with special offer terms. Things like cashback, discount or fixed rate are the most common. If you repay the mortgage within a defined period, you have to repay a certain amount. In your case 6%. This covers the losses the bank has by offering you that deal. i.e. a 2% discount for 3 years is 6%. So, they may apply a 6% charge if you redeem the mortgage in that 3 year period so they can recover their "gift" to you.

You would have known about this charge before you took out the mortgage as its on the key feature illustration which details all your potential charges. Most importantly though it would be on the mortgage offer letter (the contract). Your solicitor would have pointed these out to you if you used one (or you would have been expected to read it yourself if you didnt).

The redemption figures would also have disclosed the charge as part of the redemption figure. So you have had plenty of opportunities to either not take out a deal with a tie in or not pay the fee (by waiting until the three years is up).

MarkyMarkD

I'm almost tempted to leave it at what Dunstonh has said, as he's expressed it so well.

Devonjem is very good at reading selectively.

Let's quote Devonjem, quoting the FSA, again:

"In our view, if a MEAF term is drafted to enable the lender to recover the cost of the administration services which a lender provides when a customer exits the mortgage, the lender should ensure that the MEAF represents in fact the cost of the lender's administration services. A failure to do so is also likely to be a breach of contract."

The key word here is "if". IF a MEAF term says it's meant to represent recovery of costs, then it should represent costs. I haven't disputed that.

IF a MEAF term simply says "you will be charged a fee when your mortgage is redeemed" then that fee doesn't represent recovery of costs, and can include any element of profit the lender chooses to charge.

Shouting "my bank says that my MEAF is an administrative fee" proves nothing. Administrative fees are allowed to include profit.

Taking the points in your conclusion in turn:

Conclusion:

1. my bank has said the MEAF covers only admin fees (you now admit some banks say this - well as I said in my very first message, mine said this to me. What matters is not what the bank has said at the time you've started complaining. What matters is what the contract says about the MEAF.
2. given the bank said that, I asked the bank to breakdown its fee. That would make sense, if the bank had said that the MEAF represented a recharge of costs. It doesn't make sense if they said "it's an administration fee" as your point 1 seems to state.
3. if the fee bears no relation to the work done, the MEAF clause is unenforceable (this is the law under UTCCR, and the FSA say the same thing). No, they don't say that. They say that IF the MEAF term states that it is a recovery of costs, it should only represent recovery of costs. But there's nothing stopping recovery of any amount the lender likes, if that is how their term was worded in the first place.
4. you say my breakdown request is blackmail or something similar. Exactly as Dunstonh says, the blackmail isn't the request of a breakdown of costs. The blackmail is the statement, or implication, that if they don't refund your money (or provide a satisfactory breakdown of costs, which is the same thing) you'll take them to the FOS which will cost them more than refunding your money.
5. you are wrong to accuse me, in the circumstances as laid out in my first message, of blackmail and should not make such libellous accusations. It was actually _Andy_, not me, who first used the word blackmail. In post #2653 I stated:

MarkyMarkD wrote:

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.

Let me be clear. I do not disagree with you that, if a fee is described in a mortgage contract as being equal to the costs incurred by the lender in processing your redemption, then the fee should indeed equal those costs. And in such circumstances, it is not unreasonable for the lender to provide a cost breakdown on request. That cost breakdown may legitimately include a proportion of overheads, as the FSA stated.

But equally well an exit fee, identically with an application fee, may simply be a fee. It may not relate in any way to costs incurred. And the FSA have not said that is unacceptable either.

What a lender says, after the fact, about what a fee represents is pretty much irrelevant in terms of legal analysis. What matters is what the contract you and the lender agreed to actually said. And many lenders' contracts merely stated that an exit fee will be charged, according to their fees leaflet as published at the time. (More recently, the amount of the fee was also stated in the KFI, but the underlying contractual details didn't necessarily change because of that).

Steve_xx

dunstonh wrote: »

You are reading that totally wrong. The FSA did not want the charge to include lost profit. It does allow the transaction itself to include a margin for profit within that transaction alone. Just not cross-subsidising or being used as a way to recover lost profits or put people off from changing.

Every charge is allowed to have an element of profit within it.

You are also taking the wrong parts of Marks comments. Its all very well you asking for a breakdown. However, it doesnt matter if the provider wants to give that to you or not. There is nothing wrong with asking for one though.

Its the point where people say something along the lines "if you dont refund me in full I will take my complaint to the FOS". That is the blackmail. The FOS wont uphold the complaint as the bank is doing nothing wrong and complying with FSA rules. However, the FOS complaint will cost the bank £450 plus admin costs. When you are asking for £50-£100 back and threatening the bank with an alterantive that costs £450 then that is blackmail.

It is not blackmail. It is a legal option and it is one that seems, for some reason, to have the desired effect.

Devonjem

MarkyMark

Not selective reading at all.

I answer your red points first:

1 Yes to a large extent that is right, and the court will look for any help to interpret the clause and get to the parties' intention of the words used if there is doubt. As I have said, the bank wants payment of an admin fee. Fine by me. If the court wants help getting to the intention of the parties as to what that means, it will look for other forms of external evidence, and certainly the bank's own comments, after the contract was concluded, will assist greatly, as will the FSA comments. The fact the bank makes it clear the charge is for recovering admin costs of closing the account is how the clause will be interpreted.

2. Disagree. it makes perfect sense to ask the bank to tell me what its admin duties are to close the account, given the intention of the clause is to recover those costs.

3. This depends on the clause - see comments in 1 above. As I have said throughout, my comments are about my case and I have told you what the bank's intention of the clause (in my contract) is. In the circumstances of my case, my point no. 3 is correct

4. You said my request for a breakdown is blackmail - look at your earlier posts. Look at my first post - where is the demand for any money? my request is not blackmail. And in the circumstances of my case as explained in these posts, neither would a demand for the difference between 300 and what they can justify as admin costs. If you have a legal claim, as i would have, for the difference, that is not blackmail if the bank chooses not to fight.

5. Your reference to blackmail is in an earlier post to the one you quote.


What a lender says after conclusion of the contract is not irrelevant at all if there is doubt over the meaning of the clause. In that case the court's duty is to get to the true intention of the parties.

Your penultimate and "pen-penultimate" paras now show something new that has not appeared before in your posts. Until now, you lumped everyone together in the same boat. You say "let me be clear" - well until now you have not been. Anyway, the clause does not have to say something like "equal to the cost of redeeming the mortgage" in order for a claim to be good. The notion of "recovery of admin costs" is enough.

Devonjem

Markymark

Here is your blackmail reference:

"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."

A request for a breakdown,in the circumstances set out in my first post, is not blackmail.

Regarding the meaning of an MEAF clause, if the customer asks what it means, and the bank answers post contract execution, then what can be said of the morals of the bank if it then tries to argue that, at the time of the contract, it meant something else? It is perfectly legitimate for the customer to ask this question. If the bank is confident in what the clause means, then it should fight and not be afraid of how the court might interpret the clause.

dunstonh

I see nothing in that which suggests the post is libellous. It is not naming anyone but a generalisation.

It is not blackmail. It is a legal option and it is one that seems, for some reason, to have the desired effect.

It is also flooding the FOS with spurious complaints and increasing calls for the FOS to review its funding methods and what you can and cannot complain about. The Conservatives have already suggested that they will introduce a consumer complaint charge that would be refunded on successful complaints but not on failed ones to reduce the number of spurious complaints.

The FOS have rejected calls so far to change the system but are looking at improving the filter to allow more complaints that are fraudulent or spurious to be removed before they get passed for review (and bring a charge for doing so).

The FSA have even suggested that they will prevent certain areas of business from having access to the FOS for complaints.

So, abuse of the complaints process for spurious compaints like these could see the system changed to the detriment of the genuine consumers that have real complaints.