Looked everywhere on here........

[Robertxc]

I really wish you could claim some or part of these back, we have just had to remortgage and the redemption fee was £3700 plus about £500 in interest penalties!

 

Unfortunately i'm with the no camp on this one, we signed an agreement saying they would charge us this early repayment fee, and it was us that breached the contract by ending it early, not the mortgage company. I doubt you can claim a penny back but you might as well try.

 

Oh how an extra £4k would come in handy!

I must say, I find this quite an odd position, considering the forum where it's being posted. If I could draw an analogy, it might go like this:

 

Unfortunately i'm with the no camp on this one, we signed an agreement saying they would charge us if we go overdrawn without permission, and it was us that breached the contract by bouncing a Direct Debit, not the bank.

 

Is there a difference?

[surreyscouse]

As predicted, no reply from Lord Burns at Abbey. I will give him a chase this morning by way of asking for a fax number, and when they ask why I will explain I am upset at not receiving a response from them. Will let you all know how I get on later

[surreyscouse]

Ok, called Lord Burns office, letter sent 15th May, received 16th and logged on 18th. Has been passed to stage 2 complaints whatever that means and an aknowledgement will be with me in 5 - 7 days.

 

Ok, so just faxed over my LBA with 14 day deadline so will see what response that gets.

[GraemeC]

Good on you surryscouse - I still think there is a lot of mileage in this kind of complaint (key point being the OFT paragraph 'A redemption charge may be regarded as a penalty even if it is expressd as the price for exercising a right rather than a consequence of breaking the agreement.')

 

Link to the other thread in the Legalities section for those who may have missed it (contains a bit more discussion on the pro/cons)

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?t=863

[dinghy]

Another link in the "general" forum for those who may have missed it...

 

Carriexs87 has been successful in getting a refund...

http://www.consumeractiongroup.co.uk/forum/showthread.php?p=67345

[surreyscouse]

Update, these banks are a mess !

 

Phoned the executives office to see what the actual amount of my ERC was, spoke to a chap who said he would find out what the "penalty" was (interesting). I was then put through to a girl who said that she didn't know and I would have to write in. Hmmm, erm, I have written 2 letters to the guy that runs Abbey, is that not enough ? Well, apparently not, I have sent it to the wrong place, not my fault I said, get the Execs office to call me back with the figure.

 

She said why don't you just wait for their response, it'll be on there. Well I did write to Lord Burns 17 days ago and have heard nothing back from him so not exactly holding my breath for a response. I will let you know the amount as and when and if they call back !

[gordonhall]

Hi SS,

 

Whilst I was dubious about this line of refund, the more I think about it, I think there is some mileage in it. As you know I have a seperate thread in regards to early endowment cashing in (http://www.consumeractiongroup.co.uk/forum/showthread.php?p=71080#post71080), but I think the problem is that for far too long we just assume all of these companies can do what they please and its our fault its happening to us!

 

Well, I've just written to my endowment comany and asked how the "penalty" charges of £5K are broken down. I'll keep you informed.

 

 

On a seperate note, the forums are very slow today - must be all the traffic from last nights excellent program...

[rbrears]

For my part I think Robertxc and Surreyscouse have good instinct.

 

Mortgage redemption works rather differently than appears in post no. 8 above - you are not locked into a mortgage agreement for the term. There is an equitable right of redemption that attaches to mortgages - the borrower is entitled to redeem the mortgage at any time. This right arose many years ago to deal with unsavoury money lenders. What used to happen was that a borrower would grant a mortgage to a lender which would be repayable on x date in the future. The borrower at that time was only entitled to repay on that date. The borrower would make all the mortgage repayments (if any were due since many mortgages were simply loans with interest repayable in full one one day in the future) and then on the last day, the day for repayment, the lender would dissapear for the day so that the borrower could not make the repayment. Result? Thr borrower was in breach and the lender repossessed a property where the borrower was wanting to make the final repayment. Hence the court of equity introduced the equitable right of redemption so that this unsavoury practice could be stopped. (End of history lesson lol )

 

But what is a mortgage agreement? It is a contract. What is an early redemption penalty? It can only be a liquidated damages clause. The lender effectively gives you some benefit (lower interest rate) that causes a loss to it (you pay less interest for a period than the ususal rate) and for which a damages clause applies if you redeem during the given period (early redemption). The lender expects over the course of the given period to keep your business and makes a loss if you leave before the period expires.

 

So, the lender suffers loss. What is the loss and is it the same amount as they actually charge? If not it may be a penalty clause and (fanfare) unenforceable.

 

Keep us posted Surreyscouse - best of luck and will be following with interest (not that I have a redemption penalty to reclaim but just generally )

[Robertxc]

The lender effectively gives you some benefit (lower interest rate) that causes a loss to it (you pay less interest for a period than the ususal rate) and for which a damages clause applies if you redeem during the given period (early redemption). The lender expects over the course of the given period to keep your business and makes a loss if you leave before the period expires.

I'm not sure I agree with this. Does the lender have to suffer a loss of some sort, or does it have to be a loss in relation to a particualar contract. What I mean by this is that if my mortgage is at a lower rate and I pay it off early, surely the mortgage lender is then able to take that money which I've just repaid and lend it to someone else. So, although the may have not made as much profit out of me, they still haven't lost anything because they will now be making their profit out of someone else.

 

This subject gives me a headache.

[rbrears]

The lender lends the money at a loss of usual profit for the period in question. So your loan is x% lower than the lender's usual variable rate, or they give you a thumping great cashback at the start, or whatever......

 

The redemption penalty usually gets smaller as time passes - i.e.as the lender's losses come to an end - the low rate period/cashback period will be designed by the lender so that when the period expires the "loss" is made up - that's why you have to stay in for x years or pay a penalty.

 

I wouldn't worry about other borrowers - the loss relates to the specific contract between the lender and the borrower and the "loss" is incorporated in that agreement and made up by the borrower staying and paying for a defined period.

[surreyscouse]

Glad to see this sems to have a bit of mileage in it. I was a bit sceptical at first but I am becomming more and more convinced we can get these penalties back.

 

The fact I am pretty much being ignored by the chairman of Abbey, I mean 3 weeks and not even a written acknowledgement is appalling.

 

I will keep you all posted on this, but I really think we can get these back and if we wanted we could all ock horns and come up with dozens of ways of making the banks lives hell ! Not neccessarily for gain, but more as a form of payback for all of the grief they have put us through !!!!!!!!!

[Robertxc]

Ok, try this for an argument...all figures massively simplified for convenience...

 

When the banks lends you £100,000 for a mortgage, they are providing you with a service. The cost for that service is expressed as a percentage of the sum borrowed (the interest). Lets say that over ten years I have paid the bank £10000 in interest, and for the sake of simplicity, I still owe £100,000. Now, if I want to end my mortgage early (say it has a fifteen year redemption period), the argument goes that they are entitled to penalise me for the additional five years, during which they will 'lose' £5000 in interest. so far, so good.

 

However, I think there is a big problem with this scenario. The law requires a loss to be 'liquidated' before it can be recovered. This means that if they've lent £100,000 over ten years, after which they should have made £10,000, and you try to pay them off with only £95,000, then they would be entitled to charge you £5,000, because this is the sum it would take to put them back to where they should have been when the contract was terminated. The argument that they are losing out on potential profit fails because potential profit cannot be regarded as a liquidated loss. In its simplest form, a liquidated loss can be descrided thus:

 

"I lent you £100,000, but you only paid back £75,000, therefore my liquidated loss is £25,000".

 

In other words, "I had it before, and now I don't." You see, although it is true that they are no longer making as much profit, you must bear in mind that they are no longer providing a service, so any argument about them losing money in the future becomes meaningless.

 

Consider a variation on this arguement. If I rent a car from Hertz for one month, but return it after two weeks, they will happily take it back and refund the difference. Why? Because they will simply rent it to someone else.

 

I hope this makes sense.

[jmc5571]

Robertxc, Hi this makes good sense to me. I also agree with your earlier comment where: The mortgage company offers you a lower fixed rate to the standard variable rate. They have bought in that 'product' or amount of funds at that rate. Say the standard rate rises and you redeem they not only get your redemption money, they also have that money available again to sell on at a higher rate and gain even more.

 

I don't think there is a case where a mortgage company is making a loss on a initial rate offer, just less profit.

 

However, the only way a mortgage company could potentially lose money is if they've 'bought' a mortgage amount at a rate that becomes less competitive in a reducing market, and in that case, that's their problem anyway. No doubt in this situation they sell it on to another company that has even worse rates (and forgettable z list celebs endorsing their products) who also become quids in by passing it on to someone they deem less suitable for a good rate!!!!

[surreyscouse]

Ok here is the latest,

 

Mike Lovelace from Abbey sent me a letter which arrived on 10th June. He outlined the fact that the bank itself borrows the money and then lends it to me at a pre-determined rate. So no real surprise there. He did say that the redemption penalty (or ERC as he puts it) is in place to cover their costs. He said this was his final letter and to go to the FOS if I am still not happy, which I won't be doing.

 

So, despite 5 phonecalls asking what the ERC amount was there was no mention of it in his letter and absolutely no reference to exactly what their costs were. He did inform me verbally that the ERC was £3038. So here is my reply to his letter which I faxed over on Monday 12th:

 

Letter Before Action

 

Dear Lord Burns

Early Redemption Penalty – Mortgage Account No. XXXXXXXXXXXX

 

 

I refer to your companies letter dated 7th June 2006 from Mike Lovelace in your offices with whom I have spoken with very briefly this morning.

Mike Lovelace has confirmed that the ERC on our account when it was closed was £3,038.80.

In my letter dated 15 May 2006, I asked you to demonstrate exactly how this charge was calculated and the true costs to Abbey National Plc. When we redeemed the mortgage early. I reiterated this request in my subsequent letter dated 31 May 2006. Whilst Mike Lovelace has outlined in general terms what may or may not happen when a customer redeems their mortgage early, this in no way provides the information I have requested.

Mike Lovelace stated in his letter that the Banking Ombudsman has reported that it is not unlawful or unreasonable for a bank to recover the cost of early repayment from it’s customers. Hence the reason I have asked you to display exactly what the costs incurred were as we deem it most unlikely that the true cost to Abbey National was £3,038.80. I would therefore request once again that you display to us the costs to Abbey National and exactly how these were incurred.

Although Mike Lovelace has issued a final resolution letter, he does invite me to contact him to raise further queries. The matter of your true costs have quite clearly not been addressed. Please can you arrange for somebody to display these costs to me to the very penny.

My previous deadline for this information expires on 13 June 2006. I am prepared to allow a further seven days from this date in order for you to respond. Therefore, the deadline now expires at noon on 20 June 2006. Should I not receive a full breakdown of exactly what costs you have incurred by this time, I will issue proceedings for the full amount of £3,038.80 without further notice to yourselves.

Yours sincerely

surreyscouse

From reading the other threads on Abbey, I get the impression they are a fairly hard nut to crack and I don't doubt that this will be any different.

Any thoughts ?

[gordonhall]

I think you're in for a tough fight, but one that, ultimately, you have a good chance of winning. Of course, I'm glad its you and not me.....

[gizmo111]

Hi,

 

New to site and have been reading for a few hours. I can see the points being made about banks losing out over discounted rates etc, but I had a mortgage with GMAC that was 2% above base rate (bad credit) and still had a 3 year redemption penalty, when I remortgaged after 2 years I paid around £4000. Would love to get that back. they lost nothing and offered no incentives for mortgage, so I think tomorrow I will dig out completion statement and and ask a few more questions.

 

I also think I have about 4K in bank/credit card charges to reclaim, so when I get it a nice amount to go to site!

 

I will post on other relevant sites tomorrow.

 

Cheers

[Robertxc]

Hi,

 

New to site and have been reading for a few hours. I can see the points being made about banks losing out over discounted rates etc, but I had a mortgage with GMAC that was 2% above base rate (bad credit) and still had a 3 year redemption penalty, when I remortgaged after 2 years I paid around £4000. Would love to get that back. they lost nothing and offered no incentives for mortgage, so I think tomorrow I will dig out completion statement and and ask a few more questions.

 

I also think I have about 4K in bank/credit card charges to reclaim, so when I get it a nice amount to go to site!

 

I will post on other relevant sites tomorrow.

 

Cheers

Hello Gizmo, welcome to the forum. Your scenario is almost identicle to mine - same lender and everything. I've been thinking about this for a while and studying all these arguments in detail. I think the simplest expedient is to write to the lender and ask for a specific breakdown of their cost for ending the mortgage. If they can't provide it....well, you know the rest.

[daisy lighter]

Scurreyscouse

 

Have you any further update on this? Am following this thread with great interest. It makes complete sense that these redemption penalties (no wonder the FSA changed the official term to Early Repayment Charges) are unlawful penalities and should be addressed as such - by getting them back!

 

In suspense . . . . . . . .

 

Cat

[surreyscouse]

ok, update.

 

No response from Abbey so I called them on Thursday. I spoke to a nice young lady called Sarah who said that in the terms and conditions it states that they do not have to display any of their costs to me. Naturally I challenged this and said it will end up in court unless they show me to the exact penny what their costs and losses were. She said they won't do this so I asked her to confirm that in writing and confirm that they will never do this even if it ends up in court. That way, their solicitors will (should) not be able to use this as a defence, if they do then I think I would be entitled to at least getting my court fees back. I will update as and when and if her letter arrives.

[Rich44]

They'll never put that in writing. Well I doubt it anyway lol

[surreyscouse]

I have the address at :

 

Genesis House

301 - 349 Midsummer Boulevard

Milton Keynes

MK9 2JE

 

But does anybody have their fax number ? Thanks

[lipscombe]

Hi Surreyscouse, if you go to BT directory enquiries they also give fax numbers - regards from another surrey inhabitant x

[surreyscouse]

nice one, thanks !

[ellielou]

Hi Surreyscouse

 

Any update on this yet?

 

I 'm trying the same route with Kensington Mortgages who've just charged me £5,600.

[surreyscouse]

jeez, sory forgot to update this post as been a bit busy with MBNA.

 

Anyway, short of it is that Abbey will not advise me what their costs and losses were as it would be too expensive for them to do this and the information is "commercially sensitive". Their last letter was dated 5th July advising me of this. They did acknowledge that I am intent on commencing legal proceedings and as such advised me to direct all communication to their legal dept. which I have now done. They were kind enough to inform me that if I commence legal proceedings then the ombudsman will not investigate the case (like I am bothered).

 

Here is my letter to their legal dept.:

 

I refer to your Mike Lovelace’s letters dated 7th June 2006 and his subsequent letter dated 5th July 2006.

Abbey have failed to provide a complete breakdown in our early redemption charge to the sum of £3,038.80. Your reason being:

“I can confirm we are not in a position to provide you with the information requested due to the expense that would be incurred in doing so and the commercial sensitivity of that information.”

I would once again draw you to the Office Of Fair Trading’s statement, which was detailed in my initial letter dated 15th May 2006 and reiterated in my subsequent letter dated 31st May 2006:

“A term in a mortgage agreement which requires the borrower to pay more for breaching the contract terms than actual costs and losses caused to the lender by the breach (or a genuine pre-estimate of that) is likely to be regarded as an unfair penalty and to be unenforceable both at common law and (in a consumer mortgage) under the Unfair Terms in Consumer Contracts Regulations.

 

A redemption charge may be regarded as a penalty even if it is expressed as the price for exercising a right rather than a consequence of breaking the agreement.”

As you are unwilling to provide a complete breakdown of your costs and/or losses then I deem that the full amount of the redemption charge of £3,038.80 to be an unfair penalty and is therefore unenforceable both a common law and under the unfair terms in consumer contracts regulations.

I am therefore putting you on notice that unless the full amount of the penalty of £3,038.80 plus interest calculated at a rate of 8% from 29th October 2003 of £659.85 is repaid within 14 days from the date of this letter then court proceedings will be issued without further notice to yourselves for the total of £3,698.65 plus costs.

Should you fail to respond positively within the time scale specified then I put you on further notice that should court proceedings be necessary then I will set you to proof under oath of the full breakdown of these costs and exactly how they are incurred and to provide full written evidence of them.

I look forward to hearing from you.

Yours sincerely

Surreyscouse

That was sent on 12th July and to date no response. called abbey to see if they passed it on to legal dept (didn't have their fax no.) and the lady will check and call me back.

From now on i will keep this post updated !