abbey mortgage early redemption penalty?

[paulpb123]

Yes Juli99, put it in the 'other information' section. FWIW this is what I put:

 

I am respectfully requesting that my claim be allocated to the small claims track. This issue is not a complicated one; it is an issue of fact and not of law. The issue is only whether the money levied by the Defendant in respect of its customer's contractual breaches exceeded their actual costs incurred. The Unfair Terms in Consumer Contracts Regulations 1999 apply to my mortgage agreement because I am a consumer and the terms of the mortgage were not freely negotiated as it amounted to one of the defendant’s standard packages offered. Under paragraph 1(e) of schedule 2 this specifically includes terms which have the object of requiring any consumer, who fails his/her obligation, to pay a disproportionately high sum in compensation.I would vigorously contend that the fee of £9,750 was a disproportionate sum and was in fact a penalty charge and therefore irrecoverable in common law. I would further advise the Court that I derived no special terms or benefits (for example "cashback" or reduced interest rates) from this mortgage agreement. The Defendants have consistently refused to provide proof that the charges they imposed on my account are a true reflection of their actual losses and costs in relation to my account with them. Accordingly, I would respectfully ask that the court in this case, not withstanding allocation to the small claims track, order standard disclosure. I understand that it is in the courts discretion to do so. I believe this would bring a rapid end to this litigation.

 

You may also wish to add something along that lines that even if your claim is allocated to the fast track, you would like to seek an order that costs are not made an issue - there's a phrase for this but can't remember at the mo.

Paul

[JULI99]

Great post Paul. Might also put something in about the fact they have already called the charge a penalty. So really with everything else should be cut and dried. Although I am not counting my 14000 chickens yet.

 

juli99

[paulpb123]

Something along these lines:

 

In the event that the claim is allocated to the fast track it is respectfully requested, under the Overriding Objectives in the Civil Procedure Rules, which state that parries should be on an equal footing, that the court does so on the basis that the Claimant should not be ordered to pay the Defendant's legal costs.

 

You might find a more economical way of putting it.

 

Paul

[zootscoot]

You should be aware, however, that even if it is allowed to go to small claims the costs rule as to fast track will still generally apply.

[paulpb123]

Zoot,

Is that simply because of the amount? ie over 5k? Don't think I properly understand this...and I need to!

[JULI99]

Just filling out the final bits of my allocation questionnaire when I read Barry and Jamorgans' threads.

 

I will be still going ahead with it all but just want to cover my bum as much as possible.

 

I am not so bothered at this stage regarding the penalty arguement (am rooting for you Tamadus, when's your court date?) but would like to know is their a phrase/sentence/law term I need to use to ask them to formally disclose the costs that they have incurred for my breach of contract, (as per Barry's technicality.)

 

Also I know this might sound silly but on the AQ the section where it says "Witness Name", I have put myself. Then it says "Witness to which facts" What do I put.

 

I have no trouble speaking to complete strangers but filling out forms of any kind brings me out in a cold sweat and I have panic attacks and nightmares about them.

 

JULI99

[paulpb123]

Juli,

If you haven't issued your claim yet I think its worth taking Zoot's advice. At least wait and see what happens with claims currently going through the courts.

Paul

[JULI99]

Already up to my Allocation Questionnairre which has to be in by Friday.

 

Zoot if you have time I would be ever so grateful if you could glance over my case. No missed payments just ERC which is worked out as Penalty Days x interest = £xxxx.xx

 

Thanks in advance for any help given.

 

JULI99

[zootscoot]

The defence is pretty standard. The no breach argument which is what Morgy's case was struck out on. Although with Priestly the judge said he had an arguable case. So you could win but you could lose.

 

£14,000 is a lot of money to have taken off you. It would be astonishing to say the least if this was allowed to go to small track and even if it did the costs of fast track would apply so you would stand to lose the disclosure benefits which come with fast track but retain all the risks of costs. Not a good position.

 

As your claim is 14,000 they could quite legitimately devote more resources to defending a claim than one for say £2-3K The costs bill you face could therefore be much greater than that faced by Morgy (£4.5K).

 

I am also a little concerned at the number of questions you are raising at this stage and whether you have sufficient knowledge and understanding to stand up in court and argue the finer legal points with a barrister.

 

Don't be lulled into a false sense of security over them calling the charge a penalty. The courts are not concerned with what they call their charges. You still would have to prove that it is a penalty and the burden of proof rests with you. It is clear from Barry's case that unless you have the factual information to prove this a court is not interested in you asserting it couldn't possibly cost them 14,000 to end the mortgage no matter how clever your cross examination skills are.

 

If you are going to continue you need to be 100% committed and be prepared for the consequences should you lose. Even if you do dedicate the necessary time to it, are totally prepared and organised and give it the best shot ever, there is still a chance that the judge will decide against you.

 

There are no easy answers here.

 

All the best

 

Zoot

[DarcyCarter]

I have a mortgage on a fixed rate which I need to change due personal circumstances. I am in for 10K ERC. It occured to me that this might be a penalty but this seemed such an obvious argument, I couldn't be the first to have thought of it. Having found this forum today, how right I was!I am a lawyer (though not involved in litigation or court work). I think if the ERC was expressed as payment for breach it would be an open and shut case. ERC's based on a certain percentage of the loan can in no way be a genuine pre-estimate of the loss; not least because the actual "loss" will to a large degree depend on how interest rates have moved in the meantime. In my case, rates have gone up since I took my fixed, so arguably the lender could take my repaid funds and lend to a new borrower at a higher rate, actually making a profit from the early redemption, not a loss.The actual loss that would be incurred from ending a fixed rate mortgage early is easily calculable - there are formulas to do just this based on current rates when borrowing is redeemed early. Indeed, I have seen posts from lenders on this forum where lenders expressly state that the ERC is to compensate them for the difference in interest rates between the fixed rate and the market at the time of redemption. That is fine (when rates are falling) but is still a sum capable of being properly worked out to compensate the loss -5% etc of the loan capital is just completely arbitrary.The problem it seems to me, unlike overdraft fees etc, is that they are expressed as charges, not penalties for breach. This to me seems a slightly fatuous argument in some ways - the abililty to redeem a mortgage is clearly not a "payment for a contractual right" in the normal sense, but a penalty for breach dressed up as a charge. However, I am worried that the case law still supports the lenders' position on this - and seems to be why a poster recently got stung for 4K of costs.I am writing to them anyway stating that I am willing to pay their reasonable losses even though, legally, I believe the ERC is a penalty and therefore unenforceable in its entirety.I am not sure from the posts whether anyone has actually succeeded with this argument and received a settlement from the lender?I'd love to prove that the ERCs are penalties, but 4K costs is a big gamble!

[JULI99]

Looking up the term Breach of Contract I came across the term Efficient Breach. Could this term be used. In my case and I suspect many others it was far cheaper to "compensate" the mortgage company and move the mortgage. The point being was the erc then a true reflection of their losses?

 

Any comments gratefully recieved.

 

JULI99

[JULI99]

As your claim is 14,000 they could quite legitimately devote more resources to defending a claim than one for say £2-3K The costs bill you face could therefore be much greater than that faced by Morgy (£4.5K).

 

I am also a little concerned at the number of questions you are raising at this stage and whether you have sufficient knowledge and understanding to stand up in court and argue the finer legal points with a barrister.

 

Don't be lulled into a false sense of security over them calling the charge a penalty. The courts are not concerned with what they call their charges. You still would have to prove that it is a penalty and the burden of proof rests with you. It is clear from Barry's case that unless you have the factual information to prove this a court is not interested in you asserting it couldn't possibly cost them 14,000 to end the mortgage no matter how clever your cross examination skills are.

 

If you are going to continue you need to be 100% committed and be prepared for the consequences should you lose. Even if you do dedicate the necessary time to it, are totally prepared and organised and give it the best shot ever, there is still a chance that the judge will decide against you.

 

Just to let you know although I am a pretty confident person I do know my limitations and will be taking with me my friends husband whose jobs have included investigation and sometimes prosecution of members of the Law Society and similar with the FSA so no stranger to court proceedings.

 

 

juli99

[tamadus]

My date is 26 March Juli, I know some are a little earlier so I'll be watching those very closely.

[zootscoot]

Looking up the term Breach of Contract I came across the term Efficient Breach. Could this term be used. In my case and I suspect many others it was far cheaper to "compensate" the mortgage company and move the mortgage.

 

You would be playing right into their hands with this one. They would use this to demonstate that you exercised you right to terminate the contract inaccordance with the contractual terms rather than being forced into a breach. You would then not be able to rely on Campbell Discount v Bridge and forced to rely on the finding of a penalty in absence of a breach of contract which is perhaps the more copious of arguments.

 

Best of luck

 

Zoot

[Fullyskinted]

Question:

just had my reply back from the Prelim letter with Abbey.

 

One thing that gets me (the rest seems to tie in with Julies response from them)

 

Where I gave the two cases for reference, they have written the two case names out (Castenada vs and Dunlop vs)

Under it they say 'Im unable to comment on the above cases mentioned in your letter as they have no relevance to your mortgage account'

 

WHat the HELLL?????

 

it then goes on to say about borrow funds on the financial markets at certain rates.

When I had this mortgage it was a tracker - the interest rates then dropped, but it worked out cheaper for me to move mortgages AND add the ERC and pull £10k out of the equity as the 'new' interest rates were so much lower than when Id taken this one out...

 

The letter is from Gary R Marshall

[tamadus]

Question:

just had my reply back from the Prelim letter with Abbey.

 

One thing that gets me (the rest seems to tie in with Julies response from them)

 

Where I gave the two cases for reference, they have written the two case names out (Castenada vs and Dunlop vs)

Under it they say 'Im unable to comment on the above cases mentioned in your letter as they have no relevance to your mortgage account'

 

WHat the HELLL?????

 

it then goes on to say about borrow funds on the financial markets at certain rates.

When I had this mortgage it was a tracker - the interest rates then dropped, but it worked out cheaper for me to move mortgages AND add the ERC and pull £10k out of the equity as the 'new' interest rates were so much lower than when Id taken this one out...

 

The letter is from Gary R Marshall

 

That sounds exactly like the letter I got back from them, obviously they don't understand the findings of those cases.

 

just follow along your timescale skinted

 

They should understand the relevence after the 26 March when I get to explain it to their legal team before a judge

[JULI99]

I am going to be out of action for several months. Managed to rip my bicep from where it is supposed to be attached to a bone in the shoulder left arm absolutely kills.

Biggest problem I am facing is I will not be able to drive and we are miles from anywhere. So posting stuff etc is going to be near impossible let alone continuing with a court case for the next 3-4 months.

 

Wondered was there a template letter anywhere that I could use to get the case stayed. I can get doctors letters and consultants letters to show that the operation is going to put me out of action for several months.

 

juli99

[jezzyjet]

hi all ive had a similar expieriance with the abbey ,roughly like this..

took out 117k mortgage tied in for 6 years,after around 4 years needed remortgage for more cash ,still with abbey changed to no tie in type and upped it to around 145-150 k had to pay i think 4k penalty,havent got statement of redemption but remember being gutted at the time, can they still justify charging me as the money was allocated straight back plus more to my next mortgage with them?all advise greatly apprieciated jezzy

[zootscoot]

Hi Jezzy Jet

 

please read:

 

http://www.consumeractiongroup.co.uk/forum/mortgage-companies/62003-important-mortgage-claimants-please.html

[tamadus]

hi all ive had a similar expieriance with the abbey ,roughly like this..

took out 117k mortgage tied in for 6 years,after around 4 years needed remortgage for more cash ,still with abbey changed to no tie in type and upped it to around 145-150 k had to pay i think 4k penalty,havent got statement of redemption but remember being gutted at the time, can they still justify charging me as the money was allocated straight back plus more to my next mortgage with them?all advise greatly apprieciated jezzy

 

Jezzy,

 

I can fully appreciate how hard done by you feel but please hold fire at the moment. Hopefully I will have an answer in the next couple of months regarding ERC's.

[MinervaWM]

Looking up the term Breach of Contract I came across the term Efficient Breach. Could this term be used. In my case and I suspect many others it was far cheaper to "compensate" the mortgage company and move the mortgage. The point being was the erc then a true reflection of their losses?

 

Any comments gratefully recieved.

 

JULI99

 

Efficient breach is an academic theory in law and economics. The idea is that very often it is economically optimal (for everyone) for a contracting party to breach a contract. Say A has a contract with B to sell B 1000 widgets at £2 each, at a profit of 50p per widget, ie, £500. C comes to A and offers to buy them at £2.50 each, giving A a profit of £1000, but A can't fulfil both contracts. B would have made a profit of 25p per widget on the deal (£250). A should breach the contract with B and pay compensation of £250 - he still has £250 extra profit, B still has the profit he should have made, and C, who values the goods most, gets the goods. The world is £250 richer, because A is £250 better off, and B is no worse off - this is called a Pareto improvement. It's probably nonsense in practice, since A could never be sure what B's profits are going to be until afterwards, and C sets a new market price, so B's loss is more likely to be the extra cost of buying widgets at the higher price, thus meaning that A's extra money from C all has to go to compensate B, moreover it creates inflation. And how can C afford to pay over the going rate? Is not B a more efficient user of the widgets since he presumably can make greater profits than C or can make the profits without inflation?

 

Anyway -that's what it's all about.