ERCs- Early Repayment Charges - early exit fees. (merged).

picardygirl

Turns out that NR were right and my bank Barclays were wrong! NR came back me to confirm the actual date the transaction was made and I went back to Barclays and they confirmed it was paid, yet last week according to Barclays it hadnt!!!!

Didnt think I could have forgotten to chase a sum of money like that, but as i said cant remember four years ago, and when my bank are telling me no payment was made in that account for that amount for the entire month i immediately questioned NR ..... and there's me blaming NR ..... oh well you live and learn.

MarkyMarkD

Ah, glad to hear it picardygirl.

Funny how people who are completely sane seem to believe they might have omitted to notice the lack of what would have been a huge bit of missing money a few years ago!

Braynes

About 4 months ago I went to see the mortgage advisor at my local A&L. I was due to come out of my fixed rate product on 31 August and I had been struggling with my unsecured debts of about £50k primarily built up on low rate credit card cheques from a couple of years ago (when they seemed a good deal) to get some work done on the house. When I saw A&L I said I wanted to remortgage for an extra £50k to clear all my unsecured debt. At the meeting, the advisor also discussed my options for new products from 1st Sept. I took in all my financial info and was open and honest. She plugged the data into the computer and it said that I could have a further advance of upto £70k. She said, however, that I could run into some LTV issues on the main mortgage (around 70% with the further advance), so I should hold off with the application for a further advance until I had agreed the new product as I could get a better rate that day which would hold until 1st Sept. Although I had 3 months to go until the new product kicked in I agreed over the phone (with A&L, whilst I was sat in the branch) there and then for a base rate +2.49% tracker for two years to kick in when my current deal ended. The info came in the post and I thought nothing of it.

As some of you will no doubt have foreseen, the further advance was declined a couple of weeks later, by underwriters on the grounds of affordability. This is despite me giving the mortgage advisor everything about my debts, income etc to plug into the computer when I first went in (I even had my credit expert report) and the computer said yes. I rang her somewhat upset and asked why was I led to believe I would get the advance, and all she could say was that the computer system and the underwriters used different methods of determining affordability. She said I should remortgage with another lender. I queried whether I could get out the new product (which still had a month before it began) and she said yes, because it hadn't yet started.

I went to my bank (LloydsTSB) who I've been with for over 20 years. I should have gone there first - the mortgage advisor was great, sorted me out a C&G remortgage for the principle sum plus another £50k on top at the same 2 year tracker rate as A&L. The application went through fine, even the property valuation with E-surv went well (the money spent on the house was adequately reflected in the value uplift since purchase in 2006). So I rang A&L to tell them I didn't want to go onto the new product on 1st Sept (this was mid August by now) and they said "tough", the cooling off period had expired back in July and I was contractually bound. I told them that their own advisor told me I could cancel before the product began. The reply was that I was locked in and could not get out without paying an ERC. I had a redemption penalty of £6k upto midnight on 31st August and £4.5k at 12:01 on 1st September on the new product. Even if C&G had the money to redeem the mortgage I was trapped - I had one ERC kicking in as soon as the other ended and I could not get out of the new product. I later received a reply to my complaint, and A&L apologised that the advisor had misinformed me, but they would not budge - I could not avoid moving onto the new product on 1st Sept and if I went elsewhere I would have to pay £4.5k ERC after 1st Sept.

I feel conned by A&L. I was given every encouragement to sign up to the new product on the basis that I would get the further advance agreed shortly after. The advisor advised me to agree the new product before formally applying for the further advance. Everything she told me at the meeting suggested to me I would get the further advance.

So I have had to ask for another £4.5k from C&G (which they have agreed) to cover the ERC on a product I wanted to cancel weeks before it began and has now only been running for 3 weeks.

I will get my C&G mortgage in the next week or so and I will be glad to end my ties with A&L. I do feel like I was misled, however, and have been robbed in the process by this ERC. I didn't even sign anything - it was done over the phone sitting in the A&L branch.

My next step would seem to be the ombudsman, but am I onto a definite loser with this, or have I got any grounds to pursue them further?

dunstonh

I didn't even sign anything - it was done over the phone sitting in the A&L branch.

That differs to what you said in the first paragraph where you describe face to face contact.

There would have been a key features illustration and a revised offer letter which you would sign and return.

My next step would seem to be the ombudsman, but am I onto a definite loser with this, or have I got any grounds to pursue them further?

I have a little sympathy as the advice from the branch based clerk is generically fine based on the information she had available at that time. Problem is that lending criteria changes all the time. Plus, new information may alter a decision. So, the decision to defer the further advance application, whilst good intentioned, did leave you open to this happening.

You cannot go to the FOS without putting in a formal complaint to Santander first. I would suggest that you dont use the wording you used here as your complaint as is shows inconsistency and holes in what you say which could affect your credibility if a balance of probability decision needs to be made.

Technically, there is no actual wrong doing by Santander. Just an unfortunate turn of events. However, the complaints process should consider some fairness and the FOS will look at that as well. Its possible they would consider a reduction on complaint.

Braynes

Dunstonh,

thanks for taking time to read my post. Just to clarify, when I saw the advisor it was a face2face meeting. However she then had to phone up some other department at A&L to agree the new product on the main mortgage. This was done at the A&L branch on speakerphone with myself and the advisor in a room and a third person from A&L on the speakerphone. I agreed to the product at that meeting. The paperwork was sent confirming the agreement (which was made verbally on the 'phone) and there was definately no signature requested.

MarkyMarkD

With hindsight, Dunstonh, it's obviously not a good idea to do what Braynes did. There was no guarantee of the further advance being approved.

It sounds rather like that staff member in the branch was on a bonus for selling the product switch and did so for that reason, rather than because it was sensible advice.

I don't understand the point apparently made - that the LTV would prevent getting the product switch if the FA was done first?

I would say that there is a sound basis for a complaint as there was no sense in the transactions occurring in the order they did ... the customer was ready, willing and able to take out the further advance there and then, and would have benefited from knowing the funds were available, before extending their tie-in period. And if rejected, they could simply remortgage elsewhere and draw down the additional funds required.

Braynes

MarkyMarkD
the issue over the LTV was that with just the original mortgage amount of £220k, I was well under 70% and could get the best rate, at £270k in total, the deal was not so good, so the advice was to agree the main mortgage product before obtaining the further advance. The further advance would be initially at the SVR (although I was told I could chose a different product for this part of the mortage immediately after getting it), but the main mortgage would be at the best tracker rate offered.

dunstonh

With hindsight, Dunstonh, it's obviously not a good idea to do what Braynes did. There was no guarantee of the further advance being approved.

Hindsight clearly shows it was wrong but it depends on how it was presented. You can see what the branch clerk was suggesting and there is logic in it if you only look at the rates (i.e. buy the new deal that gives better terms for lower LTVs and then get the further advance after). However, the problem is that if you are close to the limits, you are risk of criteria changing and being rejected. If that wasnt explained then I think there is a good chance of a complaint being viewed sympathetically. I think the FOS would look at it more on fairness than Santander.

if a complaint is to be made, then the focus should be made on the fact he advice from the clerk was based on the further advance being agreed. Therefore when they rejected the further advance, they should not charge the ERC.

MarkyMarkD

If the issue, as you suggest, Dunstonh, is that Santander's pricing is illogical - i.e. that you end up paying less overall by product switching at (say) 60% and then taking a further advance up to (say) 80%, rather than taking the FA first and then switching the whole lot, then I can understand why the branch clerk would be right to suggest doing it this way. But they should have highlighted the obvious risk of the FA application being rejected and given Braynes the alternative option of doing the FA first and paying more for the product switch.

If, indeed, they did present the two options and Braynes chose to take a punt in order to get the lower rate, Braynes would have no leg to stand on. If the risk of a decline was not mentioned at all, then the product switch was absolutely mis-sold and I cannot believe that FOS would reject a complaint.

If Santander are able to produce KFIs for both options, however, they may likely win.

aqueoushumour01

looking to choose between some mortgage options and im slightly confused with ERCs. If we assume a 5yr fixed deal for £100,000 mortgage and the mortgage has an ERC of 3% of the loan for the first 3 years and 2% for the last two years of the fixed rate period. If we say I decide I have to move after one year. Do I pay only 3% of £100,000 i.e. £3,000 and that's the charge?

Or, do I pay 3% of £100k for the second year, 3% of the £100k for the third year, 2% of £100k for the fourth year and 2% of the £100k for the fith year so £10k in total i.e. pay ERCs in each year of the mortgage term I do not see out?

Any help would be much appreciated.