Mortgage ERCs

[Celestine]

This is a topic area we would really like to develop as we feel that the 'No Breach' argument is weak to say the least.

The run of defeats on CAG followed by a wholesale "ERCs??? Nothing to do with us" policy afterwards was not the best approach.

Ive got some interesting documents to post up but would love to hear others opinions on this area.

[Tools]

ERC`s , in my limited opinion , are a disproportionate penalty if they cannot demonstrate the true costs of their actual losses . I did the SAR etc for a GMAC ERC claim I was considering , but obviously after MF5`s crushing blow it was put on the back burner until any further developments / strategies came up `across the road` , still waitng ...................and waiting..................wonder when the next one will be along.

VERY interested to hear what you have on this Celestine and if possible wouldn`t mind being a guineapig if the arguement looks viable . Obviously costs awarded against me is a big worry but I wouldn`t even start it if I thought there was any doubt.

Let me know what your thoughts are Celestine , might be a `one up `on over the road .

[Guest]

To my thinking an ERC is a disguised penalty.

The principle with ERC’s (Early Repayment Charges) is that lenders insert a term which allows the borrower to end their mortgage at any time which prevents a finding of breach of the term which states the mortgage is to last for 25 years. The ERC is then applied on the happening of an event other than breach i.e. terminating the mortgage within the specified period. Certainly, if a disguised penalty is not actually unlawful, it surely must be bad faith to disguise a penalty with a provision allowing early termination, the ambiguity in the contractual clause is contrary to Reg 7 and contra proferentem rule and therefore the ambiguity should be resolved in favour of the consumer or against the person who drafted the term.

Further, the OFT raises objections under the UTCCR 1999 and states that an unfair financial penalty can apply to any term which requires excessive payment in the event of early termination, or for doing anything else that the supplier has an interest in deterring the consumer from doing. The UTCCR 1999 are concerned with the intention and effects of terms, not just their mechanism. If a term has the effect of an unfair penalty, it will be regarded as such, and not as a 'core term'. Thus a penalty cannot be made fair by transforming it into provision requiring payment of a fee for exercising a contractual option. I believe that statute supersedes case law in any case, but in Campbell Discount Co Ltd v Bridge [1962] AC 600, Lord Radcliffe (majority judgment) stated “"Terminate" is an ambiguous word, since it may refer to a termination by a right under the agreement or by a condition incorporated in it or by a deliberate breach by one party amounting to a repudiation of the whole contract.” Therefore the termination may come from either contractual right or from breach. Any condition that permits the borrower to terminate early does not therefore prevent a finding of breach of contract. Further, in http://www.legal-beagles.co.uk/forum...nk-zambia.html Mr Justice Coleman stated: "whether a provision is to be treated as a penalty is a matter of construction to be resolved by asking whether at the time the contract was entered into the predominant contractual function of the provision was to deter a party from breaking the contract or to compensate the innocent party for breach. That the contractual function is deterrent rather than compensatory can be deduced by comparing the amount that would be payable on breach with the loss that might be sustained if breach occurred."

The OFT’s objections are less likely to arise if a term is specific as to what must be paid and in what circumstances, such as with an ERC. In that case, it may be considered a 'core' term and exempt from consideration for fairness provided it is in clear language and properly drawn to consumers' attention. But the OFT notes that this may not hold good if it is a 'disguised penalty', that is, a term calculated to make consumers pay excessively for doing something that would normally be a breach of contract. Such terms are not core terms if they are disguised penalties, by definition. Their lack of core term status is particularly obvious where they are not in plain language nor adequately drawn to the consumer's attention, but clarity and highlighting cannot normally make a term acceptable where it has the effect of an unfair penalty.

There is a presumption that a charge is a penalty when "a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage" (Lord Watson in Lord Elphinstone v Monkland Iron and Coal Co., 11 App. Cas. 332). Therefore the fact that an ERC is a single fee irrespective of the actual loss is indicative of a finding of a penalty.

We must appreciate that the OFT does not have any force in law, however they do have a responsibility to represent the needs of the consumer and appear at least to have foreseen these attempts by the banks to rely on cloaking their penalties and then to pretend that they are fees for a service or for the cost of exercising a contractual right.

[willowb]

Hi guys, Ash knows I settled my ERC claim with RBS at the time of panic in the other forum. I settled for about 70%, which was great as people were frantic all around and I was absolutely ****ng myself, I was lucky that RBS are notorious for not wanting to appear in Court but it could have so easily gone the other way as their sols, as you know, are Cobbetts and they had won a Court case a few days before.

I too have another ERC claim to process against Nationwide, it's for about £700 and was charged in Aug 2001.....so not long before the 6 years passes. I would take them on gladly but am a little shy of doing so because of my last experience. maybe....

I'm definately reading with interest, I'm no law expert though and can be of little assistance but shout if you want me.

Wxxx

[Mochamoos]

I have 2 ERC's to settle... one for about 3500 (about to file dpa non compliance on TMB for not giving me anything but cashing the cheque) and the other for £5500 with Bristol and west.

I know a bloke who has won 2 ERC's claims 1 commercial about 25K and the other residential about £18k. I am not sure if he is willing to go public yet. Saying that he may be interested as one of you commercial link thingys like the solicitor hook ups. (gosh I am so technical today)

[peed 'orf]

Moochamoo, is TMB The Mortgage Business?
If so, they take a while.

[Mochamoos]

Tis indeed, they cashed the cheque on 12th december.....

[Guest]

You need to sue them at once, that usually gets their attention.

Look at this link http://www.legal-beagles.co.uk/forum...ompliance.html

[Mochamoos]

I know was meant to file months ago but then life happened and it was put on the back burner.

What I want to now is how much i sue them for? or do i just go with courts discretion?

[Ashley]

My views are well known on this subject, they are unless a new legal augment can be formed to counter the fact you entered into a bargain with your eyes wide open and a term of that bargain is that if you leave the bargain to benefit from a bargain else where you clearly knew of the ERC, it is not a disguised penalty but a fundamental aspect of the bargain.

My mortgage at present does not have a ERC, as I choose a product that did not have one by choice (we do not plan on staying here). On the other hand if we had planed to stay here for 10 years, I would have shopped around and taken a product with a ERC to benefit from a lower interest rate.

To take this on you need a new augment and evidence, with out this anyone who claims these is courting a large legal bill. Lets not forget that a man on a different website is in the process of losing his family home over this very issue.

[Ashley]

I know was meant to file months ago but then life happened and it was put on the back burner.

What I want to now is how much i sue them for? or do i just go with courts discretion?

Start a thread on the subject and I will advise.

[Ashley]

something I poseted elsewhere.

I have felt from the first time I read of these claims being brought had they had no chance of success, I felt the arguments were greatly flawed and being driven not by legal understanding, but by a sense of misplaced justice and in more than one case greed. People have placed a lot of unfounded faith in the system, that the system will protect them, as they are litigants in person, and also a great misunderstanding of the courts attitude to litigants in person.

Now I will turn to these claims and give my personal opinion, I do not expect all whom read it to agree with me, but because I care about you all and do not want to see you become victims of these claims I am going to share my opinion.

Firstly.

You were free to take a mortgage where ever you chose to, and in the event that you had little choice in your decision because of your circumstances you were free to rent and wait until your circumstances improved.

The mortgage market is highly competitive, more so then bank accounts, tens of thousands of different deals are on the market at any one time. You chose to take this mortgage as it offered you something in return for ERC, what that was differs greatly from deal to deal, from a cash back lump sum to just the ability to take a mortgage.

The banks do not try to argue this point with bank accounts, as they know you have very little choice in current accounts and that they all have the same terms, and in addition having a personal account has become a fundamental part of adult life. But this is clearly not the case with mortgages, mortgages are an instrument to a goal but not essential.

When you entered into this bargain, your mortgage company asked you in return for the bargain to give it a minimum amount of time you would trade with them, and they also said, in the event you leave before x date you will do x, the ERC. This was not hidden and you entered freely into this agreement with your eyes open.


Secondly.

Small claims, it is true that you are offered cost protection on the small claims track. And I will give you my views on this.

I do not consider given the importance of these claims that the allocation to the small claims track is appropriate to these claims. I have the awful feeling these claims have been put on the small claims track as the Judge making the allocation has not read the claim and defence and/or has been so used this last 9 months of claims brought against the banks that they have not defended, that he believed they would not defend these claims.

With this in mind my concern is that as it becomes clearer that they are going to defend ERC claims, and that the claims are re-allocated to the fast track, I would not be surprised if you tuned up for a small claims hearing, and the judge on the day adjourned and re-allocated to the fast track once he was fully aware of the nature of the claim and it was evident they are defending.

In the event that it stayed on the small claims track there are provisions within CPR in small claims for costs, when the losing party has acted unreasonably, I believe that bringing such a flawed claim is in itself unreasonable. But this is not for me to decide, and this would be different from Judge to Judge.

Although I would expect the defendant to argue that they are being prejudiced by the use of the small claims track, where for obvious reasons it has no choice but to defend these claims, in order mto maintain the commercial viability of ERCs within the industry. If their customers are free to use the small claims court to recover an amount under £5,000 and it is costing them more than the sum claimed to defend the matter, it is a clear prejudice and not what the small claims track for intended for. Due to the claim being merit less in the first place the defendants, in the interests of justice and the integrity of the civil system, should be financially compensated for having to defend the claim.

Then for many there will also be the contractual clause that allows them to recover any and all legal costs arising from the mortgage agreement, I believe also this clause in affect waves your rights to cost protections in any track, and they will be awarded reasonable costs, and trust me what the courts will consider reasonable will be far greater then you will, in MaroonFox’s claim the court considered £7,500 to be reasonable. It is also well established that these clauses are win or lose, they get reasonable costs.

If and when the defendants will bring up this clause is a matter for the defendant and its lawyers, and I would not try to second-guess them, but you, as the claimant should be aware this is a possibility if your contract has such a clause.

It is not impossible to get a settlement offer from the defendants at this stage, but I truly believe that we will be seeing the last of the settlements within the next 2 weeks (I hope I am wrong). Up until now the industry has been at a loss how to deal with these claims, and just like the bank charges have not wanted to go into court until all considerations had been made, as can be seen by Fox’s claim Cobbett’s at least put together a strong argument to it clients to convince them they should be allowed to defend the claim which they did.

Now after Fox’s hearing I firmly believe it is just a matter of time for the news to filter though out the industry of Cobbett’s success, and although it was in the county courts I expect a lot will be made of the fact they (the courts) brought in the Circuit Judge to hear the case.

[Mochamoos]

ahhh the penny drops... knew I had seen your avatar and style of writing before

[Mochamoos]

Anyone have details on this....

In the High Court of Justice (Chancery Division) Ref 6LS71298 at Leeds Combined Court Centre dated 1st February 2007
Before HH Judge Kaye QC (sitting as Judge of the High Court)
Between: Mark Gregory Smith & Susan Smith (Claimants) and Mortgage Express (Defendant)
Approved Judgement
This extends to 24 pages (25 incl covering letter) and seems to cover all the bases although the Judge appears to have been ready to accept at face (and without questioning) certain information on how the ERC is arrived at.

[friendgeorge]

i would love to go for my ERC's the total is about £10,000 and god could i do with this money, we are again stuck with GMAC until dec 07 which we have been looking around for a new deal already they are ruthless been to court twice with them due to arrears, but we got them off our back for now anyway, but i would love to get my erc's from Principality and SPML, i just don;t know where to start, principality are fighting with me for exit fees at the moment and spml well they are the pits been trying to get exit fees from them and charges for months, they won't budge at all, so if anyone can advise i'd love the help