FSA publishes exit fee guidelines

Featured in The-Mortgage-Hub ã 2007

Ó www.amortgage4you.co.uk - Specialists in bad credit mortgage

Company | Sitemap | Privacy Policy | Exchange Links | Links | Complaints

Latest news in the UK for December 2006 covering the financial news sector.

The Financial Services Authority (FSA) has published its views on recent increases in mortgage exit administration fees (MEAFs).

The FSA is responding to recent concerns that MEAFs had been increased unfairly, so consumers were being charged higher exit fees than they had expected to pay. Lenders often charge MEAFs when borrowers pay off their mortgage or switch to another lender to cover the staff and other costs involved.

Clive Briault, managing director of retail markets at the FSA, said: "We expect that these measures, agreed with the Council of Mortgage Lenders, will stop borrowers from being surprised by unexpected increases in these fees. People will now know when they sign up for a mortgage what fee they will pay on exit, or should be given a clear idea of how the fee might be increased fairly."

The FSA’s views are set out in a Statement of Good Practice issued under its powers as a qualifying body under the Unfair Terms in Consumer Contracts Regulations.

Key points are:

Current customers: Lenders will have to decide by 28 February 2007 which of the following outcomes they will adopt for their current customers:

charge no MEAF;

charge the original MEAF;

charge a revised MEAF; or

charge their current increased MEAF.

The FSA is unlikely to investigate further a lender which adopts one of the first two options, or the third option if the revised MEAF is lower than the original MEAF. However, the FSA will require lenders that adopt any other option to justify their position. The “original MEAF” will usually be the MEAF that was disclosed to the customer when they entered the original contract, took out a further advance, or changed their mortgage product.