Royal Bank Of Scotland Current Account Mortgage

ericabro

Hi,Hope someone can help us, we changed our mortgage approx 4 years ago to a current account mortgage with the RBS on advice from a member of there staff who they have now sacked,a couple of months ago they asked us to come in and talk to there mortgage advisor as they were no longer doing this type of mortgage anymore, we then discovered that although we had made regular payments of between 350-650 we had only paid of 3000 in 4 years on 80000. we did tell the advisor at the time of taking out this mortgage that all our spare cash was going to buy and renovate a property in Bulgaria,we have now changed to a fixed rate deal which is what we went into the bank 4 years ago for, when we moved we were then told that we would need to borrow 77000 to clear this even though there was 80000 available when the account closed we were left with nothing, so can we claim that this was missold? is there any point in complaining? how much would we have paid of if we had took out a fixed rate deal? we feel that we will now have to work for a extra 4 years to pay this mortgage. we have several account with them and had other money in different areas which we could of used to ofset if we had had this explained to us properly any help would be appreciated but please dont condemn us for this. Thanks to everyone who tries to help.
Erica

silvercar

If you feel that you were missold put in a complaint to the bank. They will investigate at local level and then you can take things further if appropriate.

You have to follow the internal procedures before taking any other action.

The fact that an employee was sacked is irrelevent to you. Your complaint is to the bank. How they train / monitor/ discipline their staff is not your concern.

It sounds like you have not benefitted from the offsetting on this account, but you said you were putting money elsewhere so you wouldn't have had much money to put in the offset.

From your figures it looks like you had an offset of 80,000. After 4 years, either by capital repayments or by offsetting, that has reduced by 3,000. So now that your mortgage is not an offset one, your total borrowing is 77,000.
Most mortgage repayments in early years are interest, so these figures look OK. Interest only repayments on an 80,000 mortgage would be £433 a month at 6.5%. I know your mortgage was variable, but roughly, how much above extra have you paid on in total?

You can complain that you were sold an unsuitable product, you can't complain that the increase in interest rates have meant that the mortgage has cost you more.

ericabro

Thanks Silvercar,
I do understand what you are saying and I guess that as I have already complained to them I will have to wait and see what will happen I just wanted to know weather it was worth pursuing? I have complaind both at local level and writing to Glasgow but they have just sent a code of conduct booklet to us, and if there is anyway to find out how much we would have paid of if we had took out a fixed rate deal?
Thanks Again Erica

silvercar

Just google for mortgage calculators.

Without knowing whether it was repayment or interest only and the term and the fixed interest rate you would have been offered, its difficult to say.

As a guide a repayment mortgage at 6% over 25 years would have monthly payments of £521, interest only would be £400.

ericabro

Hi Yes it would have been a repayment but like you have said who knows what the rates were back then? and that then decides how much would have come of the mortgage? To be honest we are a bit out of our depth with mortgages but if someone has any ironing they need doing I do run a ironing business is this worth pursuing or not?

ericabro

I have just heard back from the bank and they are offering me £200 and have refused to re-calculate this for me on a fixed rate mortgage. I am absolutly no good at maths and have tried several times to calculate as the advice given but can not get the figures right. can somebody please calulate it for me and give me the answer?

I have this awful fear that im going to have to work a extra 4 years.
also can they refuse to give me the information having wrote to me on three seperate occasions asking for more time to caculate these figures.
Please please give me some advice

Many thanks
Ericabro

homer_j_3

They will not calculate these figures as they are irrelevant to your complaint.

The lender has to choose what they feel is appropriate compensation for any mis-doing. If you do not agree with it then you challenge it and take it to the Financial Ombudsman Service/FOS (how to do this should have been given when the complaint was acknowledged)

It is difficult to say what action you should take as we have not seen what you stated in your letter nor the actual wording of their response.

If they have given you £200 as a gesture of goodwill then it is not them admitting fault and therefore you will need to find a response which gets them to either increase this offer to meet your actual proven loss.

If they have said that you were mis-sold and the loss is £200 then you have a right to ask how they calculated this.

If you still wish to persue this, I would ask for copies of the fact find and the suitability letter (if there was one) and see if you can find anything which doesn't ring true with your memory. Remember though - if you signed to agree the contents of any document and you failed to read correctly, you will have no leg to stand on. If you haven't signed any documents, you may be able to push down the route of you told them X,Y &Z but its your word against theirs and you will have to probably be prepared to go to the FOS (which is free for you but not the bank). You may get lucky, you may not.

Conrad

The onus is on the Bank to prove the recommendation was THE most suitable advice at the time given your objectives (to repay as much capital as possible).

I've always been suspiscious of the RBS / Virgin One offsetting product because they pay 0.6% commision to brokers whereas the rate of commission on ordinary products is around 0.3%.

Same with IF, they pay 0.6% for offsett products and 0.4% for others. All these companies are Scottish (the one account was bought by RBS)

A Scottish director of the Bank of Scotland once said to me "us Scot banks will olny lend where profits are high, we will not ever to the crazy competitive deals English lenders do as there is not enough profit".

Offsetting I think is probably not as good as a low rate long term fixed with overpayment facility - I asked the One Account to prove me wrong at a small confernence - they tried and failed.

Offsetting calculators are muppetry - they compare to other mortgages taken at normal variable rates - this is not a valid comparison.

COMPLAIN TO THE FOS.

homer_j_3

Conrad wrote: »

The onus is on the Bank to prove the recommendation was THE most suitable advice at the time given your objectives (to repay as much capital as possible).

Correct - hence why the OP should ask for Fact Find and Suitability letter to see what that says.

I've always been suspiscious of the RBS / Virgin One offsetting product because they pay 0.6% commision to brokers whereas the rate of commission on ordinary products is around 0.3%.

Same with IF, they pay 0.6% for offsett products and 0.4% for others. All these companies are Scottish (the one account was bought by RBS)

This is irrelevant as it was sold by the banks own adviser.

A Scottish director of the Bank of Scotland once said to me "us Scot banks will olny lend where profits are high, we will not ever to the crazy competitive deals English lenders do as there is not enough profit".

Offsetting I think is probably not as good as a low rate long term fixed with overpayment facility - I asked the One Account to prove me wrong at a small confernence - they tried and failed.

Offsetting calculators are muppetry - they compare to other mortgages taken at normal variable rates - this is not a valid comparison.

COMPLAIN TO THE FOS.

Regardless of the lending objectives of these companies, the OP should first work out whether there is a case to answer in terms of whether the file reflects their needs as described in my earlier post. Just saying go to the FOS is stupid. You need to know and understand your reason for complaint. If the file fully reflects the advice given and backs up the adviser and proves that the right recommendation was made then, let the OP take the £200 being offered.

ericabro

Hi all this is the letter i got from the bank so you can see my current situation. many thanks Erica.

I am sorry you have had cause to complain about the service you have recieved from the bank. As senior manager,customer relations, part of my role is to review such complaint and write what we call the banks final response letter. I should explain that a final response letter should present a picture of our understanding of your grievance and what we have done to reach a resolution. This enables the Financial Ombudsman Service to investigate your complaint should you remain dissatisfied with the outcome of our review.

I know that you have raised a number of issues with the area manager and that she has already spoken with you and written to you regarding the service problems you experienced when you visited the branch in june 2007. I trust that this aspect of your complaint has now been resolved to your satisfaction.

The purpose of your visit to the branch on 28th June 2007, was to attend a customer service review with our personal mortgage advisor. As a result of this you raised a complaint in connection with the mis-selling of the Current Account Mortgage (CAM). I understand that during this meeting the Personal mortgage advisor discussed the benefits of the CAM in detail with you. However you now believe that when you initially arranged the the mortgage in 1999 and arranged a further borrowing in 2003, the full benefits of this type of mortgage were not clearly explained to you. You believe that if you had fully understood the way in which the CAM operated, you would have trasferred your savings into the account thus reducing the interest you have been charged during the life of this mortgage. As a result you feel you have suffered financially.

While you repaid this mortgage in full on 14th September 2007 and re-mortgaged to another lender, to resolve your complaint you would like the bank to recalculate your mortgage as though it had been set up on a 5 year fixed rate at the outset and to refund any difference in interest you have paid as a result of the mortgage being set up on the CAM rate. In addition to the above, you believe that you should have received a refund of around £4000 when your mortgage was paid off on the 14th of September 2007. While our mortgage centre has explained the reason no refund is due, you remain unhappy with our explanation and want to take matters further.

For ease of reference, I will respond to each aspect of your complaint in order.

In relation to the mis-selling of your mortgage, I see that you attended meetings with the branch advisors in 1999 and 2003 to discuss your borrowing requirements. While it is not possible for me to comment on what was discussed at those interviews as I was not present. I would point out that you were provided with the product brochures and terms and conditions of the CAM mortgage which fully explain the options, benefits and effects of combining your mortgage and current account. Furthermore, you have been provided with monthly CAM plan statements which clearly show the outstanding balance of the mortgage and all the spending on the account. As interest is charged on the outstanding balance of the CAM, you were always free to pay funds into the CAM at any time thus reducing the interest charged on the account. For the above reasons, I do not agree that the CAM was mis-sold and cannot agree to recalculate the mortgage on a fixed rate basis.

Turning to the point you raised in relation to the redemption of the CAM, I understand that the CAM limit was £80,000 i.e. you could have borrowed up to this limit had you wished to do so. At redemption the debtor balance outstanding on the CAM was approximately £76,640 Dr which your solicitor paid into the bank to redeem the account. The nature of the CAM is such that is it difficult to predict what the exact balance will be at redemption and you were advised to leave some additional funds in the account to avoid any shortfall. This is because the account operates as a current account and payments you may have made some time earlier may be presented for payment at any time.

We advised you that any excess funds retained in the CAM at redemption would be refunded to you. However, you were under the impression that the bank would refund the difference between the debtor balance and the CAM limit of £80,000, you would have then had to borrow £80,000 from your new lender in order to repay the increased CAM balance. I hope that my explanation clarifies matters for you and while I apologise for any disappointment you have experienced, I do not afree that the bank has made an error in this respect.

I have considered the appropriate level of compensation carefully and it may help if I explain our approach to calculating and offering this. We offer compensation for financial loss and/or material inconvenience, which is a direct result of the bank's action or inaction. We do not use a set formula to calculate compensation but try our best to make a fair and reasonable offer taking account of the relevent aspects of the individual case. In assessing the level of compensation, we consider such matters as the apparent degree of inconvenience and the severity of the distress caused, the period over which the problem occurred and the nature of our faliures. We also consider the guidelines of the Financial Ombudsman Service and the level of compensation agreed in similar situations in the past.

Taking the above into account, it is clear that there have been faliures in relation to the service provided by the branch and in this respect, I can offer to £200 in full and final settlement of your complaint. This offer of redress remains open to you for written acceptance one month from the date of this letter.

However, if you are dissatisfied with this final response you may refer your complaint to the Financial Ombudsman Service. If you decide to take this course of action you must do so no later than six months from the date you receive this letter. The enclosed leaflet, produced by the Financial Ombudsman Service, gives you more details about what they do and how you can contact them.

Yours sincerely

Senior manager, customer relations

homer_j_3

OK.

You need to understand that if you are given a facility of £80K, providing that you do let your balance exceed this amount, you are operating within the limits of the account.

A CAM account is absolutely shocking for anybody that is not strict with their finances. Example:

You bring home £1000 per month, you spend £700 per month - the CAM would therefore automatically reduce your mortgage by £300. Not only that but if you say got paid £1000 on the 1st of the month and all your DD's went out on the 28th of the month and you lived off your credit card for the 28 days in between and repaid this on the 28th then you would have reduced your mortgage by £1000 for this period of time. This would save money.

If you brought home £1000 but ended up spending £1200 per month because of renovations etc then your mortgage balance would increase. You could completely wipe out any savings that you have made with a bit of a bad month spending.

So what the bank are saying is that because you could effectively get a quote saying you owe X, if you spend more than your income and increase your balance then X becomes Y. It is not like a traditional mortgage in this sense.

The key around your argument is 2 things.

1 - You need to prove that the mortgage was not correct for you. Look at your spending over that period of time, were you spending more than you were earning?

2 - You need to prove that the mortgage was not fully explained to you. This will be difficult but I would ask them to provide copies of their literature that you were provided and the paperwork that was completed in these meetings.

You then need to formulate your argument to take to the FOS if you still feel that this has been missold.