End of the unfair exit
Yet again the banks and building societies have been caught out in a cunning ploy devised by the taking-money-off-customers-without-them-noticing-department. This time it is the fee they charge at the end of a mortgage. Not the penalty for ending a special deal mortgage early. No, just the straightforward fee for winding up your account.
Ten years ago these fees were around £50 and they included the cost of fetching those dusty deeds from a strong room and posting them on to the next lender as well as all that pesky arithmetic to work out just what you owed and make sure you cleared your debt.
Today the exit fee is normally more than £200 and those vellum titles in secure premises under a Welsh mountain have been replaced by instantaneous electronic registration of who owns what. So the price has shot up just when costs have come down.
Worse, it has shot up for existing customers who took out the mortgage when the exit fee was quoted as £50 but who now are told that to wind up the deal they should pay £225. That’s what happened to Cheltenham & Gloucester customers who took out a mortgage in 2001 and ended it in 2006.
But then the consumer watchdog the Financial Services Authority barked the magic words ‘Unfair Terms in Consumer Contracts Regulations 1999’. Regular readers will at this point recognise an old friend. Those same regulations have already been used to cut the penalty on exceeding your credit card limit and look set to bring down overdraft penalties too. Now they are being invoked to stop banks and building societies putting up exit fees while you are looking the other way.
The FSA says that in future the lender should charge the same fee when you leave as they quoted you when you joined. It seems so fair and simple it is hard to see how the lenders thought they could get away with doing anything else. And the FSA has gone further. Anyone who has changed or paid off their mortgage in the last 12 years, can get a refund on the fee they paid if it was more at the end than was quoted at the start. The biggest savings are likely to be made by those who have remortgaged – or paid off their mortgage – in the last five years. There are more than six million of them. But there is a catch. The FSA did not make the lenders find the victims of this illegal charge and give it back. No. They only have to pay up if you claim the money back yourself.
So if you have ended a mortgage deal any time in the last twelve years and the exit fee was more at the end than the amount in the terms and conditions at the beginning ask for the difference back. If you have lost the paperwork ask the lender for the details. And if you are feeling really cheeky ask for interest at 8%. It will pay for the postage at least.
Paul Lewis
31 January 2007
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