Businessman complains over the phone

ERCs spark over 500 complaints

A freedom of information request by Bridging & Commercial has revealed that the Financial Ombudsman Service (FOS) received over 500 complaints about early repayment charges (ERCs) in the last year.

From 1st August 2015 to 31st July this year, the FOS received 508 new cases regarding early repayment charges.

The FOS also told B&C that during the same period, it upheld 21% of resolved cases.

The service also received over 6,500 affordability complaints over the past year, 51% of which were upheld.

If a borrower repays their mortgage or loan early, an early repayment charge may be payable. Different lenders have different policies as to whether they charge a fee on early repayments, or whether they offer discounted rates.

When considering complaints about early repayment charges, the FOS states that it looks to establish whether the charge has been brought fairly to the consumer's attention.

It also considers how the agreement was entered into and what the consumer was told at that time.

If the FOS decides that an early repayment charge should not have been applied, it may tell the lender to refund the charge with interest from the date of payment to the date of settlement and pay compensation to reflect any additional cost to the consumer of paying the fee.

The lender may also face paying compensation for significant distress or inconvenience that the consumer might have suffered. 

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