Unfair mortgage fee victims should seek compensation
The UK's Financial Ombudsman Service has advised consumers to seek compensation if they feel that they have been overcharged on fees for falling behind with repayments on their mortgage.
Many consumers have been charged hefty fees for going into arrears on their mortgages, and the Financial Ombudsman Service states that these consumers should contact the mortgage lender to complain and get the fees refunded if they appear to be far higher than standard administrative costs, much in the same way as thousands of consumers have done for banks.
If a mortgage lender refuses to refund the charges after the borrower has made contact, the borrower can then take the complain to the Financial Ombudsman Service, again in the same way as bank customers have done over the bank charges scandal. According to financial regulators in the UK the charges that mortgage lenders apply when the loan falls into arrears should reflect the administrative costs to the lender, which most do not.
Charges on mortgage arrears can vary, and there are a number of charges applied based upon the action taken by the bank. For instance a fee of an average £35 is charged for non payment; if debt collectors have to get involved a fee of an average £100 is charged; and if solicitors have to get involved then the lenders often charge an average £180.
These charges can quickly add up. According to the Financial Ombudsman Service complaints regarding these charges are on the up, and this is an issue that could soon become as high profile as the bank charged issue.
One mortgage broker stated: 'It is a contentious issue when lenders add something to their costs for someone in arrears.'
If this does become a major campaign like the bank charges issue many banks that offer mortgages could have to pay out million more in refunds.
Tom Smith
19th June 2007
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