Does this apply to mortgage companies as well?

[carriexs87]

When I signed up for my Leeds and Holbeck mortgage we were tied into a contract for 5 years, and we had to pay an early redemption fee if we cashed out before that of 5000 pounds. However we believed that this would go down everyyear of the five years. We sold our house and cashed in our mortgage 4 years and 11 months after we signed the contract, but Leeds and Holbeck said there wouldn't be any reduction of this fee, and their other fees had also increased by about 200%, and there was nothing we could do because thats what we signed up for. At the time we felt there was nothing we can do, but now are wondering if we can claim any of this money back. Does anyone know if we can????? Thanks

[jonni2bad]

It is my understanding that these fees are not covered by the legislation we are using to get charges refunded.

 

Essentially, this contract protected the mortgage provider for loss of income if would otherwise have enjoyed had you not moved within a certain timescale.

 

If I find evidence to suggest that I am wrong, I will update here and PM you.

 

John

[carriexs87]

Hi, Thanks for answering my thread . Thats all well and good but i dont believe with 1 month to go they where reasonable to take 5200 pounds from me to compensate 1 lost payment of 600 pounds. Do you not think i have a case at all .

[alanfromderby]

I may be wrong, but I seem to recall hearing from somewhere that the OFT are going to look into early settlement fees - unfortunately that will probably come too late in this instance.

[jonni2bad]

Whilst I do think it's disgraceful, my first thoughts are that no, you will not legally be entitled to any part of that back.

 

I'm going to get someone else to double check though, since we are talking about a substantial sum, and I wouldn't want to guide you astray...

 

[StudentInDebt]

Extract from http://www.legal500.com/devs/uk/co/ukco_022.htm (in the library)

 

Liquidated damages clauses - why are they used?

 

..

 

When will they not be enforceable?

A 'liquidated damages clause' is likely to be unenforceable as a penalty if:

 

* the pre-determined sum is considered to be an unreasonable estimate of the probable loss; or

* it has been used by one party to impose pressure or oppression on the other (which could be said to be another way of expressing the unreasonable nature of the predetermined sum).

 

If you are using the standard letters on this site then this is the principle argument against unauthorised overdraft fees, direct debits fees etc - the SOGAS and Unfair Terms and Conditions acts are icing on the cake. Although I am not a solicitor what's the difference? There a couple of other examples of case law out there along these lines.

[jonni2bad]

Liquidated damages clauses allow contracting parties to control the amount of damages that will be payable on the occurrence of a future breach of contract.

A voluntary termination of a mortgage is not a breach.

[StudentInDebt]

Fair enough

 

Found this though:

http://www.oft.gov.uk/News/Press+releases/1999/PN+43c-99.htm

3. 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 expressd as the price for exercising a right rather than a consequence of breaking the agreement.

[jonni2bad]

I will certainly pass this on, just in case, and see if the legal eagles can determine an answer. Be aware though, this is an article published by the OFT, and not a definitive statement or ruling, by the looks of it anyway, and also that it is from 1999 - 7 years could mean it's very much out of date.

 

Thanks again anyway.....

[thecornflake]

I was reading yesterday about the fact that if you cancel a contract early the company can only charge you an amount that they would not be able to get back from new customers etc. So if it was a company with loads of new customers they couldn't charge you a lot. I did actually think at the time that it could cover things like mobile contracts etc but I guess it could cover mortgages.

[alanfromderby]

Fair enough

 

Found this though:

http://www.oft.gov.uk/News/Press+releases/1999/PN+43c-99.htm

 

 

On that basis, the "loss" could be claimed to be either:

 

a) The difference in profit that the bank would have accrued from a short term mortgage deal - and the amount they made on the cancelled mortgage.

b) The amount of interest that would have accrued on the account between the day of the cancellation, and the original contracted end date.

 

Obviously the first option would be considerably less than the second - and would be nowhere near the £5000 charged - unless it was a very large mortgage indeed.

 

It does need testing - but please be aware that mine is very much a laymans view. I certainly think it could be worth challenging though.

[Robertxc]

On that basis, the "loss" could be claimed to be either:

 

a) The difference in profit that the bank would have accrued from a short term mortgage deal - and the amount they made on the cancelled mortgage.

b) The amount of interest that would have accrued on the account between the day of the cancellation, and the original contracted end date.

 

Obviously the first option would be considerably less than the second - and would be nowhere near the £5000 charged - unless it was a very large mortgage indeed.

 

It does need testing - but please be aware that mine is very much a laymans view. I certainly think it could be worth challenging though.

I'm not sure I agree. If the bank imediately take the money you've just repaid and lend it to someone else, where's the loss? I don't think 'denial of profit' is the same as 'loss'.

[alanfromderby]

As I say, it is a layman's view and I'm only thinking aloud. You could be right.

[Robertxc]

In fact, if interest rates had gone up since the mortgage was ended could you not argue that they had actually made more money by taking your repayment and lending it to someone else at a higher rate?

[carriexs87]

This topic was closed on 09 March 2019.

If you have a problem which is similar to the issues raised in this topic, then please start a new thread and you will get help and support there.

If you would like to post up some information which is relevant to this particular topic then please flag the issue up to the site team and the thread will be reopened.

- Consumer Action Group