Nice Loans.co.uk > News > Update on Finance Charges
How much are we paying to borrow?
In three seperate stories this week the charges we all pay on various types of borrowing were in the news again.
Firstly the amount we have to pay to mortgage companies in exit charges was reported as being unacceptably high, despite the FSA ruling last year that the charges were unfair for two reasons. Firstly they were regarded as being too high and not representing the actual cost to a mortgage company when terminating or closing off a customer's mortgage.
The FSA was also concerned that many mortgage companies, including some high street names like Abbey, had increased their termination charges to levels much higher than had been set when certain mortgages were originally arranged. When that ruling was made, many thousands of customers (and ex-customers) made claims for refunds which cost the mortgage companies dearly.
It has now been reported that mortgage companies are still charging termination or exit fees that are too high. Over 50 mortgage deals were reported as carrying exit charges higher than £250.
The OFT (Office of Fair Trading) is in court this week pressing for a ruling against the high charges levied against customers who take out unauthorised overdrafts (or unexpected loans), fall into arrears or other banking situations which trigger penalty charges. The High Court ruling is taking place after claims for refunds were put on hold last year pending a review.
The case is not aimed at ruling about the fairness of specific charges but at deciding whether these charges fall into the category of unfair contract terms which will give people scope to claim against them. Again the basis of the case is that the charges levied by the banks and building societies bear no relation to the actual costs incurred by the banks and are just used to generate additional revenue from customers who can least afford it.
Claims are still flooding in, despite the hold, with people hoping that the court will rule against the banks and allow millions of claims for unfair loan charges to be made valid.
There was also outrage amongst several loan brokers this week, when a division of Barclays decided to lump together different fees that are incurred during the processing of a loan and call them an arrangement fee. The move was thought to be in anticipation of further FSA rulings in the area of fees and situations in which there might be claims to recover them. It is thought that FirstPlus has made this move so that any future claims for fee refunds will fall squarely on the shoulders of brokers and not themselves. The trade body for loans brokers, the Association of Finance brokers, also expressed it's displeasure about the move.
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