Types of complaints we see
Consumers contact us with a range of complaints about early repayment charges, they may say that:
- the early repayment charge (ERC) is unfair
- the ERC is excessive, or wasn’t based on a reasonable pre-estimate of the cost to the lender of the mortgage being repaid early
- the ERC wasn’t made clear to them when they took the mortgage out
- they were misled about the ERC
- their application to transfer the mortgage to another property was turned down, so they’ve had to re-mortgage elsewhere – and now the lender wants to charge an ERC
- paying an ERC is unfair after their house was repossessed and sold
- the ERC should be refunded because of their circumstances
What we look at
When we look at complaints, we take account of a variety of things, for example:
- legal and regulatory standards – for example, Mortgage Conduct of Business (MCOB) provisions
- whether you fairly brought the charge to the customer’s attention before they agreed to take the mortgage
- how the agreement was entered into, and what the customer was told at that time
- how you calculated or applied the ERC
- whether the customer is experiencing financial hardship
We will always look at the underlying reasons that have led to an ERC being applied – and whether those reasons are the result of unfair treatment.
For example, if a lender refuses to let a customer port their mortgage to a different property – resulting in the customer remortgaging elsewhere, and incurring an ERC – we will look at whether it was reasonable for the lender to turn down the customer’s application.
Points to remember
MCOB says the ERC should be:
- disclosed in illustrations
- capable of being expressed as a cash value
- a reasonable pre-estimate of the costs the lender faces if a borrower repays early
Lenders don’t have to assess the likely cost for each individual customer. They can base the ERC on the product (or portfolio of products as a whole) and apply it to each contract.
To determine whether the ERC was based on a reasonable pre-estimate, you’ll need to show us how it was calculated. If the calculation method involves commercially sensitive information, we’ll handle it with care – though we won’t accept it as a reason not to provide us with the information.
If an ERC wasn’t a reasonable pre-estimate of the cost of early repayment, you won’t be able to charge it or replace it with a lower charge.
Putting things right
If we think an ERC’s being unfairly applied, we’d expect lenders to consider some (or all) of the following:
- refunding the ERC (with interest from the date of payment to the date of settlement)
- paying compensation to include any additional cost to the customer of paying the charge (where they had to borrow more money or lose out on savings interest, for example)
- paying compensation for any trouble, upset or distress or inconvenience the customer has experienced
Read more about understanding compensation.
‘Selling our house was the right thing to do – but our lender still applied an early repayment charge’
‘I couldn’t transfer my mortgage to another property because the lender changed its age limit’
'I've been charged because my lender wouldn't agree to my request for a larger mortgage'
'My lender didn't say there'd be an early repayment charge when I asked about redeeming my mortgage'
Search our decisions database to find out about past decisions on early repayment charges.