Dolly v Redstone Mortgages (ERC Charge)*Closed*

[dolly]

Sent Prelim letter and decided to wait against sending LBA until I got their response. This arrived today, with their apologies for the delay.

 

Have bolded the parts I find particularly interesting!

 

As I am sure you will appreciate, there are substantial costs involved in originating and administering mortgages and we seek to recover these costs over the terms of the mortgage. For this reason, the minimum loan term we allow is 5 years. Had we been informed at the time of your application that your mortgage was to be repaid within the first 3 years, the mortgage would not have been offered to you. When Customers repay their mortgage early, we seek to recover the costs by way of the ERC.

 

The ERC represents a genuine pre-estimate of the costs we incur, which include the following:

 

* Fees payable to intermediaries involved in introducing the loan, which are calculated as a percentage of the loan.

* Costs in relation to the funding of the mortgage, also calculated as a percentage of the loan.

* Operational costs

 

As you will see from the above examples, certain costs are determined by the size of the loan as they are equivalent to a % of the initial advance. I fully believe that the way by which we calculate an ERC, as a % of the amount repaid, is a reflection of the true costs and is fair and reasonable.

 

The ERC which you incurred upon redemption of your mortgage was clearly detailed in the offer, namely clause 290 (** incidentally, redemption is 4% year 1, 3% year 2, 2% year 3)

 

We have provided details of our ERC's to both the OFT and the FSA and they have not stated that they are excessive or disproportionately high. Having said that, it is not our policy to provide a detailed breakdown of these charges and I'm afraid I cannot assist you further with that particular aspect of your complaint.

Then goes on about compaint procedures etc.

 

Any thoughts ?

[zootscoot]

Hello Dolly

 

My thoughts for what they're worth

 

the minimum loan term we allow is 5 years. Had we been informed at the time of your application that your mortgage was to be repaid within the first 3 years, the mortgage would not have been offered to you.

 

Therefore clear breach of contract

 

Fees payable to intermediaries involved in introducing the loan, which are calculated as a percentage of the loan.

Is this correct or did you pay the financial advisor? Or was an extra fee levied for this at the commencement of the mortgage as is often the case? Either way you could invoke s.4 Unfair Contract Terms Act - in that they can not require a consumer to indemnify their expenses.

 

Costs in relation to the funding of the mortgage, also calculated as a percentage of the loan.

 

Correct me if I'm wrong but isn't this what you pay your monthly interest for?

 

Operational costs

 

Which would be greater the longer the mortgage continued? So why charge for saving them costs?

 

 

The ERC which you incurred upon redemption of your mortgage was clearly detailed in the offer, namely clause 290

 

The fact that a clause is agreed to does not affect a court finding of penalty. In all the cases where a finding of penalty have been made there has been no dispute regarding the clause being agreed to.

 

We have provided details of our ERC's to both the OFT and the FSA and they have not stated that they are excessive or disproportionately high.

 

OFT and FSA do not have the power to decide what is lawful only a court

 

 

As you will see from the above examples, certain costs are determined by the size of the loan as they are equivalent to a % of the initial advance. I fully believe that the way by which we calculate an ERC, as a % of the amount repaid, is a reflection of the true costs and is fair and reasonable.

 

How do they reach that conclusion it would be a rather bazarre coincidence if there was any relation to % of initial advance as against a % of the amount repaid and their actual costs?

 

it is not our policy to provide a detailed breakdown of these charges

 

Got them nailed here

 

 

 

I thought you were pursuing Halifax... or is that another claim or just my mistake?

 

Hope this helps

 

Zoot

[dolly]

Good letter isn't it?!!

 

I am claiming from Halifax on Arrears - £390 - but no ERC with them.

 

I came to the same conclusions as many of your points.

 

This one

 

Quote:

Fees payable to intermediaries involved in introducing the loan, which are calculated as a percentage of the loan.

 

Is this correct or did you pay the financial advisor? Or was an extra fee levied for this at the commencement of the mortgage as is often the case? Either way you could invoke s.4 Unfair Contract Terms Act - in that they can not require a consumer to indemnify their expenses.[/Quote]

 

We did actually pay the broker (I know we shouldn't now but at the time we were desperate as everything had already gone through when our other lender pulled mortgage offer). I think it was £500 and there was the mortgage application fee of £395 added to the mortgage as well.

 

Think I will send the LBA letter addressing those points.

 

Thanks

[dolly]

LBA typed and ready to go tomorrow

[dolly]

LBA delayed slightly for one reason or another but got another response today from them where they are still refusing to give a detailed breakdown. I must say though that I am impressed with the responses to the letters, they are not standard at all.

 

MCOL being issued on pay day next week.

[paulpb123]

Hi Dolly,

So, it is not their policy to provide a detailed breakdown of the charges. I wonder why? Could it be that they are concealing something? Accord gave me a similar load of old nonsense and from what I can gather, not one mortgage company has provided a breakdown of their losses. Its a coincidence that defies reality that its always the case that their losses represent a percentage (5% for example). This, I think, is where we've got them. Very best of luck with your claim, but you may not need luck since ERC claims are now being won and the floodgates seem to be opening. Kind regards,

Paul

[dolly]

I am hoping that as they are very personalised responses that they might refund without court...yeah right!!! Can't see them bucking the trend unfortunately but you never know - got a phonecall this afternoon asking me to hold off issuing court proceedings for a week while they look into it more. Suits me fine as I am not doing MCOL until next wednesday so I told them they could have one more week!

[dolly]

Letter thanking me for allowing them a further 7 days in the hope that they can respond positively without the need for court action.:o

[martin's little pupil]

Hi Dolly,

I will be watching this with great interest as i have got exactly the same with Redstone Mortgages but our's was a 3 year condition with the ERC not 5 years like yours, and we came out of it last year on it's second year of running and had an ERC to pay of £6,895. plus they have charged us a sealing charge of £125.00 + other small charges of this, that and the other of which im uncertain if we can claim back??, but im sure i will have fun trying. GOOD LUCK!!! Dolly i hope you have nailed them... MLP...

[dolly]

Mine wasn't actually a 5 year - it was a 3yr tie in which we stopped after about 19mths. As for the minimum term allowed being 5yrs, that is just rubbish!

[dolly]

Bog off letter back.

 

With reference to my first letter (above), Zoot can you look at this and see what you think:

 

The ERC is not a penalty as we do not consider you to be in breach of your mortgage contract with us. For a penalty to a apply there needs to have been a breach of contract. In this instance, you have abided by the terms of the contract in repaying the full amount due as well as the ERC charge. The question of a penalty does not arise.

 

I can confirm, however, that the initial set up costs included a fee of £1092 paid to your broker.

 

In the event that you decide to take this to court, I can confirm we will defend our position.

 

First letter stated this:

As I am sure you will appreciate, there are substantial costs involved in originating and administering mortgages and we seek to recover these costs over the terms of the mortgage. For this reason, the minimum loan term we allow is 5 years. Had we been informed at the time of your application that your mortgage was to be repaid within the first 3 years, the mortgage would not have been offered to you. When Customers repay their mortgage early, we seek to recover the costs by way of the ERC.

[/Quote]

[zootscoot]

Hi Dolly!

 

They have still not complied with your request for a full breakdown of their loss. If the ERC was £2,547, they have only accounted for £1,092 and whether this would count as a loss to them for your breach is debateable. Also as a fee set by a percentage it is very unlikely to represent a genuine pre-estimate of their loss. There is no mileage in their no breach argument.

 

You've given them enough time now, its not really worth responding to this go straight for money claim.

 

All the best

 

Zoot

[dolly]

MCOL issued this morning

 

Total £2547.06 + Interest of £334.53

[zootscoot]

Wahey....Good Luck Dolly!

[dolly]

Claim status is now issued on 23/10/06.

 

Deemed served 28/10/06, they have until 11/11/06 to reply.

[paulpb123]

Hi Dolly,

Good stuff. Mine was issued 23/10/06 as well. Let's see who gets there first! Best of luck,

Paul

[martin's little pupil]

Hi Dolly,

I sent in my S.A.R - (Subject Access Request) to redstone mortgages on the 30th october and have recieved my statements back today, I was only with them from June 05 to June 06.

My letter reads,

 

Dear Mr & Mrs ******

Thank you for your correspondence requesting a complete set of statements for the above account. Please find enclosed the statements as per your request.

 

Further to your enquiry please be aware that there has been NO manual intervention in relation to your mortgage account.

 

I trust that this clarifies matters.

 

Yours sincerely

 

Marie Riley

Consultant, Mortgage Adminstration Department.

 

 

Firstly, i was quite supprised to see they have admitted straight off that there was no manual intervention.

 

The statements have a ceiling fee of £125.00

A mortgage Quest fee, £65.00 Are any of these charges refundable?

General Fee Receipt £65.00

 

But when it comes to the hefty redemption penalties of £6,700.00 they have wraped it all up with the full price of the redeemed mortgage total, under the heading of credits and not under the heading of debits as they have with the ceiling fee etc, etc. sneaky uhh? or is this normal??? it don't state the amount of the redemption charge anywhere other than in with the total price redeemed.

Whats your thoughts on this Dolly??...

Yours must be very near to the date now ehh? Best of luck Dolly i sincerely hope you win them over on this one...x

Thanks!!! MLP

[dolly]

Claim Acknowledged yesterday. Boooo!!! Was hoping it could sneak to Saturday and I could have requested judgement!

 

MLP, am at work at the moment so will respond later

[dolly]

Just checked MCOL here at work and a defence has been entered.

 

Will let you know what they say as soon as I get the copy from the court.

[ellielou]

Surprise surprise................... looks like were working to the same timescales here Dolly, Kensington have done the same.

[paulpb123]

Hi Dolly,

Have you had the paperwork from the court yet? What are the main points in their defence? I'm expecting to get mine in the morning so you are 1 day ahead of me. All good wishes,

Paul

[dolly]

Paul,

 

Just got it today - all legal jargon speak. Will try and post it later but it is nothing new - just what they put in their response to the LBA but flowered up a bit!! In 3 points - we could have gone elsewhere, they did not take advantage of us and we agreed to the terms when we took the mortgage.

[dolly]

Zoot, do you fancy helping me with some fancy legal jargon for this bit in the defence, pretty please??

 

It talks about ERC's being due to set up costs and then....

 

 

In a typical case, the set-up costs would be recovered from the interest paid by the borrower in the first three years of the mortgage term.

The ERC payable if redemption occured during the first 3 years of the mortgage term was set at a level which might reasonable be expected to recoup the set up costs, so far as not recovered from the interest paid by the borrower prior to redemption.

Now, alongside the ERC charge, on redemption of the mortgage we also had to pay £4136.74 in lost interest.... I am assuming that this can be mentioned in relation to this statement?

 

Thanks

[zootscoot]

we also had to pay £4136.74 in lost interest

 

Are you not claiming this?

 

They still have to prove that thier ERC was a genuine pre-estimate of their loss and to do this they will need to provide a breakdown of their actual costs and show how a fee based on a percentage would reflect those costs.

 

They also charged you a set up fee to cover their costs how can they justify charging extra. Just how much can it cost them to set up a mortgage?

 

Stick with it Dolly!

 

All the best

 

Zoot

[dolly]

No I am not claiming that...should I have done? Bugger!!