Guidance Notes (incomplete)

[Seminole]

Early draft of some notes to help people claim back unlawful penalty charges on their mortgages. These are incomplete- in particular we need to prepare something on redemption penalties but the notes will set the scene. Please feel free to suggest changes.

 

Can I claim back charges from my mortgage account?

 

There are two types of mortgage charge:

• Penalties for missing a payment, being in arrears, the use of debt counsellors, deeds release fees etc.
  
• Penalties for redeeming a mortgage early. AT THIS POINT IN TIME WE DO NOT RECOMMEND THAT YOU PURSUE SUCH CLAIMS TO COURT.
  

The two types of charge have to be looked at separately.

 

First, however, a word of warning: If you decide to try to recover unlawful mortgage charges you must remember that you are dealing with issues affecting your home. We do not recommend that you pursue court proceedings against your CURRENT lender. Whilst the lender can’t call in the mortgage because you are seeking recovery of unlawful charges, they could cause you considerable problems if you ever fall into arrears. The only exception to this is if they are in the middle of taking possession proceedings against you and the total of the charges is greater than the arrears. Even then, you run the risk of them taking revenge in the future if you end up in arrears again.

 

As for previous lender, feel free to issue proceedings if you feel you have a case.

 

Before taking any action, it is important that you obtain a full Subject Access Request disclosure under the Data Protection Act. You must obtain a full statement of account setting out all transactions since the start of the mortgage plus a schedule listing manual interventions in the account.

 

The statement will enable you to work out what has been charged and when it was charged. Remember that with a mortgage (not to be confused with a simple secured loan) you can recover up to 12 years of charges although you may have difficulty in obtaining 12 years of records for an old mortgage.

 

For each type of charge you need to think about whether it is a penalty. Some things are likely to be unlawful penalty charges like monthly arrears charges where there is little evidence from the list of manual interventions that the mortgage company did much in that month. Similarly charges for bounced transactions may be unlawful although do remember that the mortgage company is not like a bank- it is the receiver of funds and will have to do more work than a bank which simply refuses to make a payment,

 

Other charges are irrecoverable where they could be held to represent some sort of service or relate to the cost of legal proceedings. For example, legal costs in possession proceedings will be irrecoverable in almost all circumstances but you should still ask for certified proof that these charges relate to the direct reasonable costs incurred due to your breach of the mortgage contract. Similarly charges for releasing deeds and dealing with the administration of paying off the mortgage are likely to be regarded as services although there is some concern about the way these charges have increased over the past few years.

 

There are some charges that fall into a grey area. A mortgage/ debt counsellor’s fee could be regarded as either a service or a penalty. The mortgage counsellor is unlikely to provide better advice than someone from the CAB. The mortgage counsellor is also acting as an agent of the mortgage company and therefore does not have a duty of care to the customer. Nevertheless, it is at least debatable that this is a service.

 

Similarly, penalty interest is highly debatable. This is where the mortgage company charges you interest on any arrears. This may be recoverable but we recommend that you leave it out of any claim to allow you to argue that this represents fair compensation to the bank for your breach of the agreement rather than the fixed monthly charges that they have applied.

 

To be continued

[maybelline]

I imagine the same advice applies to those with secured loans?

[MARTIN3030]

Great info.............dont apply to me personally but I know will apply to quite a few.

[Seminole]

I imagine the same advice applies to those with secured loans?

 

Yes, but not the bit about redemption penalties when we add it.

[kia]

so are you saying i shouldnt try to claim back charges from my current mortgage provider. Why will they try and close us done

[maybelline]

my understanding of the notes is that if you should get into any difficulty with them at a later date, having approached them for unfair charges, they may not be cooperative and take the first opportunity to 'get rid'

 

I dont know if this has happened to anyone but I know my lender has already shown itself to be extremely unsympathetic to date, as soon as I can change I will and then I will make my decision.

[kia]

thanks for guiadance ill wait abit and make enquires about changing provider only thing is weve not being that good a payers i wonder why?

[kia]

hiya kia again have sent off request for mortgage statements with the letter for back statements from our then current account was that right or what?and was it right i can go back 12 years with morgages?

[LES VOGEL]

HI great advise above SEMINOLE- i have sent of dpa request to woolwich for our mortgage we had going back to 1991 and we paid off in 2003 so great news to hear that i can claim all my charges for the entire life of the loan, i shall wait to see what info i get back, i have had letter from "barclays "saying all the paperwork is being put together and they returned my 10.00 cheque fee. what were you able to claim back from abbey (if it was a mortgage)i see you were successful so your advise is going to be of upmost importance to me, i'm very excited to see what the charges are going to be- as i know we had problems along the way and i know they had applied arrears fees- it was an interest only mortgage i paid 43,700 in 1991 and paid up in 2003 51,000, goodness knows how much that loan cost me in total. i tread to think but getting the news that i can claim all those yrs of charges back will hopefully make a difference. any help is most gratefully received. waiting now for dpa. cheers LES.

[craigamc]

Can we claim ERC and redemption interest?

[martin65]

Any update on redemption charges.

[kia]

hiya still waiting for the alliance and leicester to get my mortgage statements back to me the cheeky lot only sent our old current account statements not our mortgage statements they probably hoped wed forgotten about those no such luck i dont forget anything

[catherinebear]

Hi there everyone

 

We are trying to get ERC back from GMAC and Kensington (I am still awaiting statements from both as I know because of our circumstances there will be plenty of charges added) I would assume that we claim separately for ERC and charges. However, I have had a letter today from GMAC as a final reply to my complaint in August saying that we should write to their legal department in future but they are not treating the matter as a formal complaint!!! what are they on. They refer to their Mortgage Conditions a copy of which they sent me and can you believe it they only put a 1st class stamp on it and there was £1.23 postage to pay!!!! I have kept the envelope! The conditions state:-

 

"The company's right to recover its costs and expenses entitles it:

 

(a) to recover the costs and expenses which it has to pay to third parties, and

 

(b) to recover its internal costs by charging administration fees in accordance with its published tariff.

 

Any help on what you suggest we do as our next move write to the Legal Department asking for our money back or pursue through County Court?

 

Any comments would be welcome.

Many thanks

Catherine and Dave

[LES VOGEL]

YES but just what are their true cost's that they say they are entitled to charge???? we have all asked for disclosure of their true cost's and not one bank/c/card/mortgage company has given us or any c/court in the land this information. If they are saying to go through their legal dept then I would, but remember the timelines stand as they are- in other words the 40 days to comply with your DPA request for all statements to arrive,sometimes this is just wasting time tactic's!!!! so use who-ever. I have started court action against woolwich mortgage for all my arrears fees that came to £6000 plus i added on 7% interest per year(averege) which they would of done on top, plus the 8% c/court interest you are allowed to do and also add £25.00 for preparing your court case- which you are allowed also- in all that little lot comes to around £13,000-£14,000 and this is part one of my claim against them- the next part is claiming some money back for being mis-sold my mortgage with them over the whole period of 12yrs, i've got my original agreement which states all sorts of things that they should of done after 2yrs, but didnt and i've been advised by an financial adviser that because of that i can say i was mis-sold mortgage- but for now part one will do nicely. how long have you been waiting for your statements? if 40days are up then you must start c/court action and report them to ICO for non-compliance- you will have to claim for unspecified amount until you find out how much they owe you. cheers LES

[Notty]

If you claim £13,000 back will you have to pay their costs if you were to lose? If so how much do you think that would be, is there a set amount. I thought I had read £750 somewhere but maybe that is for bank charges? Would be interested to know. I want to claim £7000 back from GMAC but I am worried that it would go on the fast track.

[MARTIN3030]

Costs are discretionary anyway as far as you being asked to pay them.

The judge is not automatically sure to make you pay 750.00 if they win

 

The small claims too although restricted to 5k has leverage in that.

However at this stage the prospects of you losing are not high stakes since it has yet to happen.

The important thing with a claim this size on an n1 is to prepare well and leave nothing to chance.If you put the case over having regard to the experiences of cases to date then you should have nothing to fear.......least of all paying their costs.

[chindley]

reading this thread with interest as Iam about to pay off my mortgage , Nationwide want to charge me £1500 for this. Iam wondering if it is worth putting aletter together to ask them to drop the charge and state the relevant law cases in the letter telling them it is a penalty yada yada yada!!!. Also whwen I took ut the mortgage they charged me an LTV (loan to value ) fee of £40 a month. Do you think that this is recoverable or was that aservice rather than a penalty. Thanks in advance..

[Andy Mc1]

Many thanks for posting the guidance notes for ounitive charges on mortgage accounts. I have today received a response to my S.A.R to Halifax plc -

 

'Further to our conversation I would apologise that the copy statements requested have not been received. Enclosed is a further copy of the statements from January 2000, and I trust that this meets with your requirements.

 

With regard to your request for information relating to manual intervention on your account, HBOS plc is under no statutory oblibation to record this informaton and therefore, I am anable to assist with your request.'

 

This raises two points that other forum users may be able to clear up for me -

 

1. Am I entitled to the entire account history of my mortgage under the terms of the S.A.R? I have received only the last 6 years worth.

 

2. Aren't HBOS/Halifax obliged to record manual interventions?

A cursory look at the statements shows that calls are logged and actions recorded.

 

Apologies - just very new to all this!

 

Andy Mc1

[maybelline]

hello, I received copy statements from Halifax back to 1994. I sent in my SAR and a lady rang to say she would send six years, I told her that I wanted all of them back to the start of the account for my own information. I received them all, but it did take a couple of reminders.

 

I was debited £5.

[kia]

yes you are intitled to all the statements for the full term of the mortgage and dont let them talk you out of it xKia

[maybelline]

I have rec'd my 'Statement of Account Charges' from GE. It starts with a minus value and the proceeds over time to 0.00 and accumulates charges progressively. I admit I am not at all mathematical so I am confused as to whether the charges on this section are debits or credits?

[Andy Mc1]

Many thanks for advice - have contacted Ken Patton at HBOS with the good news that he'll have to send more statements, and that the 40 days are up.

[doyin22]

Read this thread with interest...I went after charges from Halifax on my mortgage and they have now replied offering £500 compensation for my arreas and Repayemnt Fee, should i take this or do i have a case?

 

My breakdown of charges are:

Product arrangement fee - £399

Higher lending Charge - £1069.40

Deedds Dispatch Fee - £50

ERC - £823.81

Arreas Charge - £310

Repayment Admin Fee - £175

Total claiming £2826.40

[maybelline]

it is your choice but have a look at the charges and see if you think it is a penalty, their is a thread that outlines the types of charges that could be considered so as they probably do not reflect the true cost involved, go back to FAQ's or use search. it looks to me like you could be owed more than is being offered, remember it is your money.

[paulpb123]

Its about time the templates for ERCs were in one place as there are more and more people coming here seeking to reclaim them. Hopefully this will save time for all. A note of caution to anyone wishing to reclaim an ERC. This is still a relatively new area and the mortgage companies seem to be fighting hard. Make sure that you are fully conversant with the basis of your claim. There have been a number of successes to date (maybe 5) but there are lots of claims at fairly advanced stages. If you don't feel confident then wait to see how the current ones turn out. So, here are the letters and they are almost entirely the work of our resident expert, Zoot, who's thread is essential reading for anyone going down the ERC road. Find it here:

 

http://www.consumeractiongroup.co.uk/forum/other-institutions-successes/19501-zoot-halifax-mortgages.html

 

Here are the letters which you may, of course, adapt to suit your needs:

 

1) Preliminary request for payment:

 

Request for repayment of early redemption charge

 

Dear Sir/Madam

 

Account Number: xxxxxxxxxxx

 

I am writing to request a refund of the early redemption charge of £xxxx which was debited to my account when I redeemed my mortgage on xx/xx/xxxx. I now understand that this charge is in all likelihood disproportionate to the costs that you actually incured. As such, this penalty is unlawful at Common Law, Statute and recent consumer regulations. Such disproportionate charges are considered to be unfair per se by the OFT who reported on 5th April 2006 and are therefore presumed to be unlawful in the absence of specific proof to the contrary.

 

If you believe that this charge is proportionate to the costs you have incured as a result of the early redemption of my mortgage, could you please demonstrate this by providing a full breakdown of those costs or a pre-estimate of your losses. Please note that I do not require an explanation as to why this charge was made; I am fully aware of the terms and conditions of my mortgage. What I require is a breakdown of your costs in order to reassure me that the charge is justified.

 

Having taken legal advice on this matter it is very clear, as you will no doubt be aware, that English contract law requires such charges to be a genuine pre-estimate of your losses. In the case of Castaneda and Others v Clydebank Engineering and Shipbuilding Co Ltd., (1902) 12 SLT 498 the House of Lords held that a contractual party can only recover damages for actual or liquidated losses incured from a breach of contract as opposed to a charge which represents a penalty. This was upheld in the case of Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79. In addition to this, your charge represents an unfair term of contract which is contrary to the Unfair Terms in Consumer Contracts Regulations 1999 (SL. 1999/2083). Your charges constitute an unfair penalty under Schedule 2 of the said regulations which provide an indicative and non-exhaustive list of terms which may be regarded as unfair. Under paragraph 1(e) of schedule 2 this specifically includes terms which have the object of requiring any consumer who fails his obligation to pay a disproportionately high sum in compensation.

 

I would also like to bring to your attention the following statement by the Office of Fair Trading:

 

A term in a mortgage agreement which requires the borrower to pay more for breaching the contract 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 at Common Law and (in a consumer mortgage) under the Unfair Terms in Consumer Contracts Regulations.

 

The fact that I signed the mortgage offer containing the term relating to the early redemption charge does not make this term enforceable, as I’m sure your legal department are fully aware.

 

I will now give you 14 days to reply to me accepting, unconditionally, my request in principle and letting me know a date by which I will receive payment.

 

If you do not respond, or if you do not respond positively, within this time period, I shall send you a Letter Before Action giving you a further 14 days in which to reflect. While I would like to settle this matter amicably and without the need for court action and the attendant publicity this will receive, you can take this letter as 28 days notice of my intention to issue a claim should you not comply with my request. I believe that these targets are more than sufficient for a large company such as yours with dedicated staff and departments.

 

Yours faithfully,

 

xxxxxxx

 

2) You probably won't get much joy so after the 14 days, the next step is the letter before action:

 

LETTER BEFORE ACTION

 

Dear XXXXX,

 

ACCOUNT NUMBER: XXXXXX

 

 

 

We are very disappointed that you have failed to respond to our letter of the XXXXX relating to the repayment of the redemption fee of XXXX. Since paying the fee we now understand that such fees are unlawful and unenforceable as outlined in our previous letter. We would draw your attention to the terms of the contract which you agreed to at the time that we opened our account. It is an implied term of that contract that you would conduct yourselves lawfully and in a manner which complies with UK law.

 

We are frankly shocked that you have operated our account in this way as we had always reposed confidence in your integrity and expertise as our fiduciary. We require repayment in full of this money. If you do not comply fully within 14 days then we shall initiate court proceedings against you for the full amount, plus interest, plus costs and without further notice.

 

 

 

Yours faithfully,

 

xxxxxx

 

3) They will tell you that you were aware of the Ts & Cs and that you didn't break the contract, you merely exercised a right to redeem the mortgage. The only way forward is to take them to court. This is the particulars of claim which just about fits on the MCOL form:

 

I am claiming the return of money taken by the defendant in the way of a redemption penalty charge on xx/xx/xxxx from account no xxxx. This charge relates to my breach of contract in that I terminated the contract before the agreed period. The defendant's charge for my breach is a disproportionate penalty and therefore unenforceable as it is contrary to common law as established in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79. Further, as a disproportionate penalty it is invalid under the Unfair (Contracts) Terms Act 1977 s.4 and under the Unfair Terms in Consumer Contracts Regulations 1999. Para.8 and sch.2(1)(e). I have repeatedly asked the defendant to justify their charges but they have declined to do so.

 

4) They will drag their heals and keep you waiting till the last minute but will probably submit a defence at the 11th hour. If you need to respond to their defence Saraounia has done some great work. Find it here its number 15:

 

http://www.consumeractiongroup.co.uk/forum/mortgage-companies/32610-saraounia-simpleloans-gmac-rfc.html

 

Here are jonni2bad's notes on filling in the Allocation Questionaire:

 

http://www.consumeractiongroup.co.uk/forum/bank-templates-library/11644-allocation-questionnaires-guide-completion.html

 

That should just about cover it. If there are any mistakes in the above or I've missed something I'm sure someone will point it out! In many cases ERCs can be very large sums so be aware that if your ERC is over £5,000 there is the issue of costs should you lose your case. Good luck with claiming back your ERC.