Saraounia Vs I group

[saraounia]

ERC Claim

 

20/09/02 I group - £5,489.55 paid

 

21/09/06 Sent prelim letter to registered office by registered mail

[martin65]

I had a second charge on my property via a loan with these people,received my statements but the charges dont add up I was aware of the erc in the contract.

 

Are you /were you in a similar position as I am unsure whether my claim should be the ERC only the charges levied to the account only or a combination of both.

[saraounia]

They were my only lender. I think the idea is that any excessive charge which does not approximate to their acutal loss as a result of redemption is unacceptable. To my mind, this would include any exorbitant charge - bank charges, ERC, interest on ERC, very high penalties for non payment of this or that. Please note, I am no expert however and this is a very new area of consumer action / enquiry.

 

If I were you, I would ask them to specify all costs charged you think are over the top.

[saraounia]

8/10/06 Sent LBA, gave till 23/10 to respond

 

1/11/06 - MCOL issued

[saraounia]

9/11/06 A letter out of the blue...

 

'Early repayment charges are standard in the mortgage industry and the sales person who sold you your mortgage would have made you aware of their existence. The level of early repayment charges are clearly stated in both your T&Cs and in your mortgage information booklet - both of whic you received prior to your mortgage commencing. I have enclosed copies of these for you. The fact you would be required to pay and ERC on early settlement was also discussed in your welcomoe call, you confirmed your understanding of our early repayment charges during this call.

 

ERC are designed to help us recover the costs of customers settling early. These costs include:

1) The cost of specialist reseources we use to set up our loans and assess our risks

2) Our administrative expenses in maintaing your account

3) The commisions paid to intermediaries on loans which complete because (a) the specialised loans we make involve intermediareis carrying out more work than normal (for example to satisfy ouro need to make sure you can meet your payment obligations), and (b) a high percentage of loan applications do not result in a loan being made, so the broker will receive no comomision on these, even if he has done almost all of the work

4) An element of our loss of profits caused by you repaying the loan early.

 

In light of these costs, we will not be looking to refund the ERC.'

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Interesting design I would say - a very useful breakdown of the components of their costs, which i haven't seen anywhere before.

 

I see though he has excluded the profit element. It all sounds very plausible until you realise it may well be against the law because they are only allowed to recover a reasonable pre estimate of genuine loss, which does not include profit for anyone.

 

With regards to disclosing actual costs:

1) the cost of specialist resources we use to set up....I presume this refers to underwriters specifically because all legal and valuation expenses are paid by the applicant. There is a further admin fee paid by the applicant to cover the process of application, assessment etc. At least that is how they explain the charges. So what other specialist input / cost might this refer to?

2) Our administrative expenses in maintaing your account.....Once the account is all set up, this must be purely IT driven as long as there are no manual interventions. For an automated process, the cost must be peanuts.

3) Our funding costs....Em, they borrow at low interbank rate and lend to me at a higher rate. Where is a cost to them in that? I think they mean I have cost them profit. Yes, they have to endure costs to be in business and that should be covered by their pricing of the products. I am not arguing with the pricing but the penalty element.

4) The commissions....am thoroughly confused by this one. If further surveys etc are required. The applicant pays up front. The broker may or may not get a fee depending on the type of mortgage. I paid direct to my broker and so compensated him directly. Commission paid by the mortgage company is surely like any other cost to bring the product to market, especially if they will only offer the product to the market via a broker.

5) An element of our loss of profits caused by you repaying the loan early. As far as I understand the law, this is illegal. They cannot make me compensate for lost future profits, which they would have got if I had not terminated the loan when i did.

 

All in all I think the pricing of their products would cover their working costs to offer, process, issue and maintain my mortgage. If not, that is not my problem. If they issue a loss making product to induce people to sign up, they cannot then get you to compensate them for lost profits, only actual losses. And they cannot charge twice for each element of cost. Nor can they say I must compensate them for all their costs after he fact, when they issued a loss making product to the market. Nor charge me for future profit lost.

 

Any comments much appreciated.

 

Will sit tight and wait for their acknowledgement of service.