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

chryami

You're right MarkyMarkD. Mortgages are exempt from this directive.

malchish

chryami wrote: »

Has not the European consumer credit directive been transposed into national law in the UK? Member States were supposed to comply with it by the 11th of June 2010.
Article 16 says:
"The consumer shall be entitled at any time to discharge fully or partially his obligations under a credit agreement. In such cases, he shall be entitled to a reduction in the total cost of the credit, such reduction consisting of the interest and the costs for the remaining duration of the contract.
2. In the event of early repayment of credit the creditor shall be entitled to fair and objectively justified compensation for possible costs directly linked to early repayment of credit provided that the early repayment falls within a period for which the borrowing rate is fixed.
Such compensation may not exceed 1 % of the amount of credit repaid early, if the period of time between the early repayment and the agreed termination of the credit agreement exceeds one year. If the period does not exceed one year, the compensation may not exceed 0,5 % of the amount of credit repaid early."
Thus any early repayment charges above 1% of the amount of early repayment should normally be illegal.

Mortgages are NOT exempt from this! Great post!:T:T
Look how our "local full-time" posters react with desperation! "iterest" they cry, when it is clearly a percentage of total balance remaining.!!!

malchish

Mortgages are NOT excluded from The Directive (see above):
(only second charge mortgages, such as secured loans, seem to be excluded)
Are any agreements regulated under the CCA but outside the scope of the CCD?

In some respects, the CCA is wider than the CCD. In particular, the CCD will not cover the following types of agreement regulated under the CCA (known as "out-of-scope" agreements):

• Lending to small businesses, partnerships and unincorporated bodies.
• Loans below EUR 200 (which has been set at £160).
• Loans above EUR 75,000 (which has been set at £60,260).
• Second charge mortgages.
• Hire purchase agreements (although it would appear that conditional sale agreements are within scope).
• Credit with no interest or other charges, and repayable within three months with no interest and no, or only insignificant, charges.
• Consumer hire agreements.

MarkyMarkD

What on earth has that quote got to do with anything?

All it says is that "second charge mortgages", which are covered under the Consumer Credit Act, are not covered under the CCD. Nothing about first charge mortgages at all.

First charge mortgages are not covered under the CCA. The government guide to the CCD here: http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/r/10-1072-consumer-credit-directive-quick-guide.pdf

states:

The implementing regulations apply to all consumer credit agreements regulated under the CCA (other than agreements secured on land), but with modifications for certain types of agreement as noted in the individual chapters of the full guidance. The existing CCA regime is unchanged in relation to agreements secured on land and consumer hire agreements (although lenders may choose to comply with the new requirements in respect of agreements secured on land).

Basically, the CCD imposes some changes to agreements regulated under the CCA, which doesn't include most mortgages.

malchish

CCD is independent from CCA. CCA excluded mortgages in the UK. CCD does not exclude mortgages. It is up to UK government to issue the exclusion, so far no exclusion has been decided. ~In fact, Council of Mortgage Lenders had to respond to European CCD with discussions how to ensure implementation for mortgages.
In the link provided by d...tosh nothing indicates any exclusion. Ordinary tactic... provide link without info... looks solid!

Vansv

Hi Guys,

Is there anyone that can help me please !!!

I applied for a morgage with HSBc in October 2004( three years interest only ), but the completion taken place in February2005
To my great surprised, HSBc started charging me full interest ,plus capital in November 2007.
I complained to them , claiming that three years should be March 2008,

As usual they claim that the date that i applied for the morgage that count , not when the money is being released

Good job , i read the small pint , which mention that the date might changed , depending on the date of the money being released

Now they kind of accepting their faults, have been talking to numerous manager

But now i want to go further with , this ie claiming interest , etc

they have been overcharging nearly £700 over 4 months

Guys : how much you reckon i can claim

because if if you dont pay your installement they can repossesed your property, now they overcharging for 4 months,,,,is that a breach of contract

can i brought a civil case against them

please help me

dunstonh

Is there anyone that can help me please !!!

For future reference, please dont post to existing threads that have nothing to do with your subject. Either create your own thread or join in one about the same subject.

I applied for a morgage with HSBc in October 2004( three years interest only ), but the completion taken place in February2005
To my great surprised, HSBc started charging me full interest ,plus capital in November 2007.
I complained to them , claiming that three years should be March 2008,

Typically they are not 3 years or 2 years or 5 years from when the money is advanced. Its up to a specific date which may be 3 years and 3 months when first offered but 2 years and 9 months by the time the money is advanced.

As usual they claim that the date that i applied for the morgage that count , not when the money is being released

which is the correct response. Your only get out on this is if their paperwork at the time was poorly written.

Guys : how much you reckon i can claim

Only as much as you are financially worse off by.

because if if you dont pay your installement they can repossesed your property, now they overcharging for 4 months,,,,is that a breach of contract

What difference does it make if it is or it isnt?

can i brought a civil case against them

On what grounds and for what benefit?

country_mover

Hi,
I am about to become the victim of the ERC swindle, although perhaps I shouldn't call it that as apparently it is legal.

Almost 3 years ago (33 months) I took out a fixed rate mortgage with a provider, however, I am just about to exchange contracts on a new property which requires me to get a redemption statement. I will be due to complete in December but the last payment of the fixed rate period is February 2011.

Now the mortgage provider is saying that I have to pay them 6 months interest as I will be repaying the loan early. That's right, I am repaying the loan 3 months before it is due to finish.

I am pretty much being asked to repay the same redemption amount with 3 months to go as I would have by repaying the loan after 1 month of payments. The Building society have had 33 payments of £464 and they want to charge me £1530 plus £140 as I will be missing the remaining 3 payments.

Legally they are covered as the mortgage offer stated the redemption condition and I signed up to that condition. The thing that really grates with me is that I have been paying over the odds as I took out the mortgage before the interest rates took a nose dive.

Of course this is the risk that you take when you sign up for a fixed rate deal; I am not disputing the monthly payments that I have been paying and I am not disputing that the LAW has been followed. I am disputing that there is no room for common sense or fair play in this situation. I have researched other providers and they appear to include redemption charges on a reducing percentage basis. This would appear to be much fairer as the provider will have recouped some of the costs associated with offering the product.

I have made contact with The Nottingham several times but they are sticking to their defence that the mortgage offer states the terms and I signed up to those terms. They do not "think that it would be fair" to waive or reduce the ERC and their position is final.

They have sent me a leaflet on the financial Ombudsman and stated that I can persue it through those lines.

I would love somebody on here to tell me that they are wrong and I am free from any obligation but unfortunately life does not always work that way. My post is a warning to others that may be tempted to take out a fixed rate deal without checking the small print.

I did call the Ombudsman service but the lady on the other end of the phone couldn't have been less interested but she did raaise a case number for me to quote. I am not going to give up yet as the Ombudsman's web site states that an ERC could classed as unfair if it is more than the actual loss to the lender.

MarkyMarkD

If you read the whole of the thread, you will realise that the part of the FOS wording that you quote actually says that the loss to the lender does not have to be calculated on an individual customer basis, but across all customers who bought that product. In other words, level ERC percentages are OK as long as the overall ERC income is equivalent to the overall loss caused by early redemption, even though there will be individual winners and losers.

Nobody is making you buy a new house. You could wait until the ERC expires. You could port the mortgage to the new property. There are almost always alternatives.

You say "The thing that really grates with me is that I have been paying over the odds as I took out the mortgage before the interest rates took a nose dive. " but then contradict yourself by saying that you realise that is "the risk you take when you sign up for a fixed rate deal". I think you are missing the point of a fixed rate - you buy it to eliminate the risk of your rate increasing, not to increase your risk if rates fall!

Most people buy fixed rates so that they have certainty and know they can afford their mortgage payments. All you've lost is the opportunity for a windfall saving as rates have fallen.

country_mover

You think that I am missing the point?

You need to read the text and understand that I have not complained amount the rate rise just the fact that any costs incurred by offering the fixed rate would have been more than paid for.

The issue is that the money making institutions are happy to take our tax paying pounds when they need help but when there is a clear case for making a reduction they take the faceless stance whilst others suffer.

The current state of the economy (and housing market) does not give the consumer the choice. I have had my house on the market for almost a year and now I am in a position to move I am not going to take the risk of loosing my buyer.

Porting the mortgage is not an option with the product I took out. Do not take such a tone with people who are trying to raise awareness amongst other potential borrowers. If I had the opportunity (33) months ago I would have welcomed the advice