Leaving HL without transfer charges

gterr

masonic wrote: »

As written in my post above, HL have delayed implementing the new charges until 2nd June, so you should be ok.

I think it's just the transfer out charges that are not changing until June. The other charges start on 1st March, I think.

SnowMan

lejog2003 wrote: »

My management fees for holding a 3 tracker funds in a SIPP that pay HL no commission are rising from £6 a month to £110 a month. To think that people moaned about a £2 platform fee! I've contacted HL about waiving exit charges (£75 for a SIPP) and have received the following reply.

We are sorry to hear that you are considering transferring away from Hargreaves Lansdown. However, we are not required to permit transfers out without charge. Our Terms & Conditions allow us to vary our terms to reflect current or future changes in law, Financial Conduct Authority (FCA) rules or regulations, without providing the option of a free transfer. Our recent changes are the result of a regulatory initiative by the FCA and as such they do not require us to permit free transfers out.

The scale of the increase does make a difference because it shows the scale of the imbalance.

The starting point of your argument is that you were already been explicitly charged to hold the trackers. So that was either regulatory compliant or you had the reasonable expectation that you were being explicitly charged. And so this has nothing to do with RDR but is a simple increase to the explicit charge.

In addition the OFT guidance OFT311 (in particular pages 52 to 58) is crystal clear that price changes (as opposed to other changes) are fundamental changes to the contract, and this isn’t a potential loophole for HL to use, for example in the footnote on page 58 the OFT say, ‘note the absence of a 'valid reasons' route to fairness. The OFT does not consider that use of 'valid reasons' normally justifies price increases, essentially on grounds stated in paragraph 12.3 that is, lack of verifiability.

This is based on Schedule 2 of Unfair Terms in Consumer Contracts Regulations, UTCCR (in case it confuses the group 12 in the OFT guidance refers to the 1(l) term as (l) is the 12th letter in the alphabet) which includes within the indicative and non-exhaustive list of terms which may be regarded as unfair (and 1 (l) is referenced in the FCA guidance 3.4 also)

1 (l) providing for the price of goods to be determined at the time of delivery or allowing a seller of goods or supplier of services to increase their price without in both cases giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded;

So the starting point is that the Hargreaves Lansdown are at strong suspicion of having an unfair term. And the imbalance caused by a 1800% increase in fees is a significant imbalance.



The secondary argument I have suggested above is based on the increase being a unilateral change in the terms and conditions (via the 2 steps mentioned) because the original terms just said that they could change terms with 30 days notice. This comes under 1 (j) of the regulations of indicative reasons which may be regarded as unfair

(j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;

and previous cases (such as my own FOS referral against HL) have pretty much confirmed such unilaterally increases simply can't be done without a free exit route by waiving of re-registration charges.

masonic

gterr wrote: »

I think it's just the transfer out charges that are not changing until June. The other charges start on 1st March, I think.

Thanks, yes I didn't mean to suggest the new platform charges are being delayed. I misinterpreted lejog2003's statement and thought he was referring to the additional account closure/cash transfer fees.

masonic

SnowMan wrote: »

The starting point of your argument is that you were already been explicitly charged to hold the trackers. So that was either regulatory compliant or you had the reasonable expectation that you were being explicitly charged. And so this has nothing to do with RDR but is a simple increase to the explicit charge.

I've already tested the water with that argument and it appears it is on shaky ground according to a message I received from HL...

The changes to the treatment of passive funds on our platform is determined by the new rules introduced by the FCA, which specify that all fund holdings must be subject to the same platform charge. We must therefore charge for holding tracker funds at the same rate as we do for other actively managed funds, and as such can no longer maintain our current £1 or £2 per month platform fee for these investments. We realise that this will be detrimental to some clients, and it is not a step that we have taken lightly.

If that is true (and I have no reason to believe it isn't), then HL has a valid reason for making that change, so any argument must hinge on the fact that customers are not free to dissolve the contract if they reject the new terms.

Edit: Although I guess an argument could be made that they set a precedent when they started charging £1 or £2 per month for non-commission paying funds and therefore only needed to extend the £2 per month per holding charge to the other funds for the purposes of compliance with the FCA.

SnowMan

masonic wrote: »

If that is true (and I have no reason to believe it isn't), then HL has a valid reason for making that change, so any argument must hinge on the fact that customers are not free to dissolve the contract if they reject the new terms.

As the OFT guidance makes clear there isn't a valid reason route to fairness so it matters not if HL think they have a valid reason. Being alreday explicitly charged does mean an 1800% increase is not verifiable.

It says in 12.4 of the guidance that such a change can be fair if customers are given the chance to exit freely.

That is what is wrong here that HL haven't given that opportunity to exit freely (the FCA guidance makes clear that leaving freely includes waiving re-registration charges).

So I think we are agreeing that HL can increase charges significantly but they must provide the free exit route through waiving of re-registration charges and by failing to waive these charges they go wrong.

There is also a FCA requirement to treat customers fairly. Is imposing an 1800% increase without allowing a free exit 'treating customers fairly'? I don't think so.

Ultimately it will be for the FOS to decide.

guitarman001

Is there a conclusion to this thread?
You'll just have to pay up if you want to switch broker?

SnowMan

guitarman001 wrote: »

Is there a conclusion to this thread?
You'll just have to pay up if you want to switch broker?

The conclusion is you will need to take a case to the Financial Ombudsman Service to get re-registration charges waived, but there is plenty of ammunition to do that (but no absolute guarantee of success).

masonic

SnowMan wrote: »

As the OFT guidance makes clear there isn't a valid reason route to fairness so it matters not if HL think they have a valid reason. An 1800% increase is not verifiable.

I think this is the only bit that seems to be a bit unclear to me. HL, through the RDR, has been prevented from retaining the same charging structure for passive funds, while introducing a different set of charges for other funds (let's assume for the sake of argument that they wanted to do just that). So, it could be concluded that:
(a) The change is for a valid reason, but the fairness of the change is subject to verification
(b) The change is not for a valid reason because there were other ways HL could become RDR compliant without changing the fee on trackers (i.e. charge on all holdings at £2 per month). HL have conflated a regulatory change with a price increase for trackers.

(a) could be problematic if it can be answered in terms of fairness for HL's customer base as a whole (I don't know if it can or not, but I wouldn't want to use the argument without knowing what arguments HL might be allowed to use to verify the fairness of the change).

(b) might be easier to argue, since any reasonable person would see precedent of a £2 per month charge for a clean fund prior to the changes and expect charges to continue on at least a similar basis. It also allows you to make a firm argument for being given the chance to exit freely under the UTCCR.

It says in 12.4 of the guidance that such a change can be fair if customers are given the chance to exit freely.
<snip>

I'm in complete agreement with you about this statement and its consequences.

There is also a FCA requirement to treat customers fairly. Is imposing an 1800% increase without allowing a free exit 'treating customers fairly'? I don't think so.

I would agree, but in the interests of trying to build the most convincing argument against the exit fees, I'm hoping an appeal to general principles of fairness will just be a throwaway line at the end of any complaint.

innovate

Anyone know whether and how much HL will have to pay if a complaint goes to the FOS?

May sound a bit perverse, but if I had to pay £400 exit fees, and they would have to pay £500 if my complaint goes to the FOS, I wouldn't mind so much, even if I didn't win at the FOS.

SnowMan

innovate wrote: »

Anyone know whether and how much HL will have to pay if a complaint goes to the FOS?

May sound a bit perverse, but if I had to pay £400 exit fees, and they would have to pay £500 if my complaint goes to the FOS, I wouldn't mind so much, even if I didn't win at the FOS.

£550 I think (although they get some 'free' cases first)

http://www.financial-ombudsman.org.uk/publications/technical_notes/QG1.pdf