Gmac Redemption Charges - **WON**

[laineynic]

hI

 

Sorry if I have posted these questions in the wrong place, but I wasn't sure where to go.

 

We were at the solicitors today to sign the contracts for the new house we are in the process of buying. This has now bought the sale to a standstill

 

We were going through the paperwork for our mortgage with GMAC. It states that if you redeem the mortgage in 1 - 2 years you pay a penalty of 5%, if you pay of the mortgage in 2 - 3 years you pay 4%. In our case this is £2105.

 

We thought we had taken the mortgage out on the 29th September 2003. It turns out that the mortgage was taken out on the 20th November 2003. Will this mean that we will have to pay the penalty of £2105. We had hoped to move into the house on the 20th October.

 

The couple who have bought our house have been wanting to get into the house since the beginning of September. The house we have bought the couple have now moved and the house is standing empty.

 

It is about time redempion charges were banned. How can you swap and change for your own benefit if you are penalised for doing so.

 

Lainey nic

[buzby]

That's why there is competition in the marketplace. One good deal is offset by a caveat - in your case the redemption clause. It's pernicious, but it's what you agreed to. The fact there's only 2 months in it won;t matter to the building socierty, unless you can make it worth their while and negotiate a new arrangement with them? There are times this type on negotiation at branch level can work to your advantage.

[meagain]

The redemption charge is surely unlawful, as it's an attempt to get you to pay interest on money you owe for a time when you no longer owe it.

[gizmo111]

That's why there is competition in the marketplace. One good deal is offset by a caveat - in your case the redemption clause. It's pernicious, but it's what you agreed to. The fact there's only 2 months in it won;t matter to the building socierty, unless you can make it worth their while and negotiate a new arrangement with them? There are times this type on negotiation at branch level can work to your advantage.

 

This is n't a building society and reasonable and helpful have not usually been in GMAC's vocabulary.

[buzby]

The redemption charge is surely unlawful, as it's an attempt to get you to pay interest on money you owe for a time when you no longer owe it.

 

It's certainly not 'unlawful', the puter has to opportunity of deciding which company he wants to throw money at, by attempting to minimise the clawbacks these firms will try to impose. It has to be said from the outset, it is simply leverage to keep the customer with them - golden handcuffs, if you like. I just don;t deal with firms that work that way, but it's getting mighty difficult to finfd them as the OFT seems to think all these otherwise underhand methods is the price we pay for competition. Unpopular, yes - illegal, no!

[meagain]

It's certainly not 'unlawful', the puter has to opportunity of deciding which company he wants to throw money at, by attempting to minimise the clawbacks these firms will try to impose.

 

So, the bank charges aren't unlawful, since there are plenty of them to choose from, and it should be easy enough to just choose a bank which offers the lowest charges and the lowest unauthorised lending rate, right?

 

Choice or not, an early redemption penalty is an attempt to charge interest on money no longer owed, and I am told they are standard practice in the mortgage industry.

[buzby]

Erm - first you're talking about 'redemption' and now its 'bank charges'. My comments related to the redemption fees which would have been a notified contractural addition to the mortgage. It's called a promotion, and lock-ins are no more illegal than a marriage licence... you make a commitment, and pay the consequences if you don't!

[meagain]

Erm - first you're talking about 'redemption' and now its 'bank charges'. My comments related to the redemption fees which would have been a notified contractural addition to the mortgage. It's called a promotion, and lock-ins are no more illegal than a marriage licence... you make a commitment, and pay the consequences if you don't!

 

I am still failing to see your point about why they're lawful even when they're patently a penalty, and charge interest on money that is no longer owed.

[laineynic]

They may be charges that we have signed and agreed to, but it doen't mean it right. Unless people challenge it like we have done over bank charges then companies like Gmac will continue to do what they do.

 

In a free market we should be able to pick and choose when we want to move our mortgages. What is good for us yesterday may not be good enough for us tomorrow, We should penalise them for not offering us the best deal. In an ideal world we should beable to say to a lender your rates not good enough I am withdrawing my services.

 

When we took out the mortgage 35 months ago it was the best we could get. But we are moving houe - they can't offer us the best deal. When we contacted them to re-arrange a mortgage they told us that we can't contact them direct and we would need to go through our broker. As we didn't have one we have now had to pay a brokers fee - and they found Gmac to be uncompetitve and the deals were not good enough. So why should I be penalised for moving my mortgage when they refused to help.

 

Companies like Gmac have had it to good for to long and it's time they were stopped - redemption penalties are a rip off. :-x

[gizmo111]

Erm - first you're talking about 'redemption' and now its 'bank charges'. My comments related to the redemption fees which would have been a notified contractural addition to the mortgage. It's called a promotion, and lock-ins are no more illegal than a marriage licence... you make a commitment, and pay the consequences if you don't!

 

Err - not true - ERC's are unlawful if they are disproprtianate to the cost to the lender - if you check out the threads here and read the letters and the supporting legislation expertly supplied by zootscoot you will see the difference between a marraige and a liason with a loan shark.

[reidnet]

Marriage redemption fees...lol wish I could reclaim what the ex got off me..

[gizmo111]

Marriage redemption fees...lol wish I could reclaim what the ex got off me..

 

me too

[buzby]

I am still failing to see your point about why they're lawful even when they're patently a penalty, and charge interest on money that is no longer owed.

 

Right. It is a marketing tool to retain business - not all companies charge the fee, and it was your choice to go with the company that did. The fees calculated (which no doubt were discounted on one that didn't have such a mortgage) meant the customer had a choice. It was an arrangement that the borrower may not like (or not know of until after the event) to to blandly state they are 'illegal' is nonsense - point me to legislation that says they must not be offered?

 

Firms are perfectly entitle to offer their products in the markewtplace, and if customer like them they will buy. Complaining about some problem down the line because it has just been realised that it's going to cost more money than originally imagined, and subsequently trying to say it's 'illegal' would be laughted out of court in the first instance. People usualkly don't like contracts. We now have Mortgage Arrangement Fees, but these are seldom challenged because without agreeing to this, you wouldn't even get a sniff at the money.

 

I agree the cost of this should be part of the services provided as part of the business - imagine if windowcleaners started applying a 'ladder fee' or a milkman a 'carton/bottle fee'?

 

All it takes is for a judge to say 'if you didn't like the penalty, why did you take out the mortgage with this company'. If the response is because you never thought it would apply, or that it's a rip-off won't gain much sympathy.

 

Oh - and how can there be a penalty when - if you complete your side of the contract - they don't apply?

[buzby]

They may be charges that we have signed and agreed to, but it doen't mean it right. Unless people challenge it like we have done over bank charges then companies like Gmac will continue to do what they do.. :-x

 

You challenge it by NOT signing up to them and going elsewhere. Simple, and effective the company will quickly get the message. Bank charges are a different ballgame as they are open ended and can spiral out of control. A redemption fee is known from the outset and is easily factored in at the outset. The applicant can then decide whether it's worthwhile taking it, or sourcing a different product that perhaps has no such penalty.

[buzby]

Marriage redemption fees...lol wish I could reclaim what the ex got off me..

 

I had this idea once - just as Private Eye magazine (small ads) offers to sell you heraldic titles like Lord of The Manor, Sir, Lady, Lord etc etc - I could create a rubber stamp that claimed; "Due to the applicants not paying the renewal fee, the licence is revoked". (Actually, I was hard pressed to think of ANY licence availavle in the UK that you don't have to renew anually. I wonder why?)

[meagain]

Right. It is a marketing tool to retain business - not all companies charge the fee, and it was your choice to go with the company that did. The fees calculated (which no doubt were discounted on one that didn't have such a mortgage) meant the customer had a choice. It was an arrangement that the borrower may not like (or not know of until after the event) to to blandly state they are 'illegal' is nonsense - point me to legislation that says they must not be offered?

 

Mu. I will answer this when you rephrase the paragraph such that it makes sense.

 

Firms are perfectly entitle to offer their products in the markewtplace, and if customer like them they will buy.

 

I refer my learned colleague to the example I presented some posts prior. There are dozens of banks on the high street offering personal accounts. Their fees are not all at the same level. Does this mean that £35 for a bounced cheque is acceptable, because you could have gone with another bank that only charges £15 for it?

 

Complaining about some problem down the line because it has just been realised that it's going to cost more money than originally imagined, and subsequently trying to say it's 'illegal' would be laughted out of court in the first instance.

 

Who said it was illegal?

 

People usualkly don't like contracts. We now have Mortgage Arrangement Fees, but these are seldom challenged because without agreeing to this, you wouldn't even get a sniff at the money

...

All it takes is for a judge to say 'if you didn't like the penalty, why did you take out the mortgage with this company'. If the response is because you never thought it would apply, or that it's a rip-off won't gain much sympathy.

 

The simple answer is that you took out the mortgage with these fees, because you had no choice - in exactly the same way as the bank accounts. Why did you take out an account with that bank, knowing you'd be charged excessively? Because you didn't have a say in the matter - it was take the charges or have no account. Similarly, it is a case of pay the extortionate fees, and agree to further extortionate fees further down the line, or no mortgage.

 

You challenge it by NOT signing up to them and going elsewhere. Simple, and effective the company will quickly get the message.

 

Right, you just go to the companies that don't charge you extortionate fees. Oh, of course, I forgot there aren't any ...

 

Oh - and how can there be a penalty when - if you complete your side of the contract - they don't apply?

 

Of course, this is so much different to bank charges, which also don't apply if you keep your side of the agreement.

 

There's the issues of "losses" to the lender. You can divide the charge into two parts: future interest, and profit. The profit element is unlawful, as we all know - it inflates the actual "damage". Then there's the future interest - interest you would have paid had you continued to owe the money, though I believe that is unlawful too, since (and I could be wrong here) I believe it is unlawful (possibly illegal, but at least unlawful) to levy interest on money that is not owed. If you owe someone money, they are entitled to charge interest on the amount that it is owed for the time that it is owing, and no more. If you no longer owe the money, then they are no longer entitled to charge interest on it.

[laineynic]

Than you all for posting your views which are very interesting.

 

The person who seems to be spouting the most seems to be doing a great job for the Lenders. What are you on commision? Yes we read the print yes we took out a mortgage which has penalties - but it does not mean it is right.

 

Why should people like GMAC get away with this? why should the penalties be of £2140 because I want to switch to a better value mortgage. When you sign the contract you don't know what is going to happen tomorrow.

 

Your word "not unlawfull" how about immopral, how about hitting people who are the most vulnerable harder. Not fair and in my eys immoral. Unless people stand up and say this is right they will continue to do so.

 

I guesse when this site was first set up did they ever think that thousands of pounds would be given back to us? But it has because shouting loud enough and saying to banks building societies and gmac enough is enough and we arent tolerating it any more.

 

Its easy for people to say well you signed and you did this and did the other. Maybe I didn't have a choice.

[purplefile]

laineynic

I will leave the ERC & legalities alone as you are probably better to sort that out when you escape from Gmac.

Short term.

If you moving house & the mortgage isnt portable try telling Gmac that you are complaing to the FSA. The FSA is not happy with this situation as it is not seen as treating customers fairly. A serious threat to involve FSA may help.

However I was wondering why you thought September and not November? Seems like a long time to be wrong about.

Did you think you had moved into your house in Sept or recieve remortgage money in Sept?

I'm just thinking that you could of started the mortgage in September but the first payment could quite easily have been in October and not showing on the CAIS system untill November??

If your 1st payment was larger than your normal monthly amount then this may be the case.

Have you a bank statement from 2003 or your solicitors bill?

Or did you just get your dates wrong?

[zootscoot]

Well I have successfully claimed back my ERC along with four other people on the site and there are a good few claims in the process.

 

Check out the mortgage forum under 'other institutions' and you will find plenty of debate on the issues.

 

Gmac are not the easiest to take on although there are a few claims in the process you might want to keep your eye on.

 

If you follow the link in my signature you will see the legal basis for my claim along with a preliminary letter, LBA and particulars of claim.

 

Best of luck with the move and I am sure you will see get your ERC back in the future!

 

Zoot

[patdavies]

(Actually, I was hard pressed to think of ANY licence availavle in the UK that you don't have to renew anually. I wonder why?)

 

Driving licence?

[meagain]

If it makes a difference, companies are entitled to bill you for losses or damages as a result of your action. The interest they charge on loans is profit - they charge you more than the BofE would charge them - and I don't recall anything in law which says you have to indemnify them against your thwarting their attempts to profit from you.

 

Driving licence?

 

True. That only kicks in once you hit 70, and then only every three years. I suppose it's the exception to prove the rule

[buzby]

Driving licence?

As I understand it, it has to be renewed annually after you are 70, and that there's talk of the 70 years expiration of standard licences will change to 5-year duration.

[buzby]

Mu. I will answer this when you rephrase the paragraph such that it makes sense.

 

I will as soon as Mu replies.

 

I refer my learned colleague to the example I presented some posts prior. There are dozens of banks on the high street offering personal accounts. Their fees are not all at the same level. Does this mean that £35 for a bounced cheque is acceptable, because you could have gone with another bank that only charges £15 for it?

 

Not the issue being discussed at all. Try giving an example that makes sense and is relevant to a company that provides mortgages. 'Fines' for bouncing cheques are one thing. Terminating an agreed contract early results in fees being required to release you from that commitment.

 

 

Who said it was illegal?

 

An earlier poster - 'unlawful' was the exact quote.

 

The simple answer is that you took out the mortgage with these fees, because you had no choice - in exactly the same way as the bank accounts. Why did you take out an account with that bank, knowing you'd be charged excessively? Because you didn't have a say in the matter - it was take the charges or have no account. Similarly, it is a case of pay the extortionate fees, and agree to further extortionate fees further down the line, or no mortgage.

 

My goodness - so as I understand this the applicant is dragged screaming into an office and made to sign a legally binging contract against their will? One would have thought the OFT would have outlawed that type of shap practice years ago. A mortgage is not the same as a bank account, the product, its purpose and redemption are not even close.

 

Right, you just go to the companies that don't charge you extortionate fees. Oh, of course, I forgot there aren't any ...

 

So because there aren't, we'll just sign up to anyone and bitch about it later? A greeat idea.

 

There's the issues of "losses" to the lender. You can divide the charge into two parts: future interest, and profit. The profit element is unlawful, as we all know - it inflates the actual "damage". Then there's the future interest - interest you would have paid had you continued to owe the money, though I believe that is unlawful too, since (and I could be wrong here) I believe it is unlawful (possibly illegal, but at least unlawful) to levy interest on money that is not owed. If you owe someone money, they are entitled to charge interest on the amount that it is owed for the time that it is owing, and no more. If you no longer owe the money, then they are no longer entitled to charge interest on it.

 

Disagree entirely. You continue to equate a contract agreement lasting 25 years or so to equate to a banks handling of penalties for financial misdemeanour for late payments or direct debit mayhem. You know where you are with the former, you've no chance of knowing with the latter.

[buzby]

I am still failing to see your point about why they're lawful even when they're patently a penalty, and charge interest on money that is no longer owed.

 

Because in much the same way credit card companies charge variable interest rates based on your financial circumstances, the same hold true for mortgage companies. If you agree to a lock-in, you'll get the mortgage at a cheaper rate than someone who doesn't. I pay 6.5%, others pay less, but I've no early redemption penalty

 

What you appear to suggest is that someone with an ERP and a 4.5% mortgage should just pay the company's lost interest and walk away? I'm paying for the privilege of not being penalised in this way - I see no reason why someone should have an unfair advantage over my by doing an end run round their contract obligations.

[meagain]

I will as soon as Mu replies.

 

Yeah, now that was a mature answer ...

 

Not the issue being discussed at all. Try giving an example that makes sense and is relevant to a company that provides mortgages. 'Fines' for bouncing cheques are one thing. Terminating an agreed contract early results in fees being required to release you from that commitment.

 

It's a fine for ending the agreement. Why must that necessarily result in a fee?

 

An earlier poster - 'unlawful' was the exact quote.

 

As you'd know if you'd actually read through these forums, "unlawful" and "illegal" are not the same thing.

 

My goodness - so as I understand this the applicant is dragged screaming into an office and made to sign a legally binging contract against their will?

 

Again, your maturity is showing. The customer has no choice, since they can't realistically go elsewhere - they'd only find the same practices employed, which is why it is rather like the example of the bank account. You can't get a mortgage without extortionate fees attached in some form or another, hence the consumer has no choice in the matter.

 

So because there aren't, we'll just sign up to anyone and bitch about it later? A greeat idea.

 

In the lack of an alternative, it's the only idea.