Mortgage exit administration fees
Mortgage exit administration fees are charged by lenders when consumers exit their mortgage, even if they are not repaying it early. Lenders charge the fees to cover the costs of the administration services they incur when consumers exit their mortgage contracts. They can include costs such as deed release fees and changing the registration at the Land Registry.
We published a Statement of Good Practice on Mortgage Exit Administration Fees (the Statement) in January 2007. This was to explain our concerns with recent increases to mortgage exit administration fees (MEAFs) and to encourage the industry to implement its own solutions to the issues raised.
In the Statement we included two timeframes for firms to act by. We are now publishing an update on our findings so far on firms' responses to these timeframes.
Background
We do not set prices for the products we regulate and firms can vary the amount they charge for services, such as mortgage administration. However, when a firm changes the amount it charges, the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations) require it to act fairly.
We examined a number of mortgage contracts and found some lenders were changing their MEAFs in what we believed was an unfair way. So we worked with the Council of Mortgage Lenders to publish our Statement on MEAFs in January 2007.
In the Statement we outlined the law and principles we believe apply to MEAFs and the practical outcomes we expect from the industry.
In the Statement we split customers into three categories:
- Future customers – customers who take out a mortgage from 1 August 2007 onwards.
- Existing customers – customers who have a mortgage which started before 1 August 2007.
- Past customers – customers who have paid a mortgage exit administration fee in the past.
November 2007 follow-up
We have continued to monitor how firms treat their customers on MEAFs since our August 2007 update. We are concerned that some firms still include terms in their contracts that do not comply with our Statement and so may be unfair.
We are concerned about:
- terms that put the burden of proof on customers;
- variation terms; and
- firms not applying the law and principles set out in the Statement to terms that vary other charges, not just MEAFs.
This note explains our areas of concern and how we think firms should address them. However, it does not raise new issues and we are still achieving our main aim of stopping firms charging customers unexpected increases to MEAFs.
MEAFs: November 2007 follow-up
Terms varying mortgage charges in general - August 2008
We have carried out a further review to see if, 18 months on from the Statement, the concerns outlined in our November 2007 follow-up note have been addressed. Disappointingly, we found that some firms continue to include terms in their contracts that provide for the variation of charges in general, not just MEAFs, which we think are unfairly drafted.
Terms providing for the variation of charges in mortgage contracts
Further information
Press release: Mortgage exit administration fees (MEAFs): an update - August 2007
Katherine Webster's speech to the Council of Mortgage Lenders - July 2007
Fairness of terms in consumer contracts: Statement of good practice on mortgage exit administration fees (MEAFs) [PDF] - January 2007