Yesterday (01.04.13) saw the official launch of the new Financial Conduct Authority (FCA). Many people in the UK media have expressed the hope that it’ll be more effective than the FSA that it replaces.
It was unfortunate that the chosen launch date was (a) April Fool’s Day and (b) a Bank Holiday, when it was a good bet that nobody would be at work; neither in the new authority nor in most of the organisations over which it was supposed to be watchdogging.
As I flagged up recently, Sunday Times Money (31.03.13) published a list of ten demands for the new watchdog. I am featuring three of them on this blog.
Unfair mortgage terms
According to Holly Thomas, who wrote the Sunday Times Money feature, the small print in bank and building society contracts is a source of problems.
[It was ever thus! Which of us reads the small print? I know I don’t. Maybe that’s one of the reasons I got into my own financial troubles]
Thomas writes that in 2010 a well-known building society (I’m not going to name them, for fear of legal action; my legal budget is not as large as that of the Sunday Times) scrapped the ceiling on its SVR (standard variable rate). By doing that it reneged on its promise that customers would never pay more than 3% over Bank base rate.
And a bank sparked outrage (I’m not surprised) when it announced rate rises for some so-called “lifetime tracker” mortgages … although the aforementioned base rate had stayed unchanged at 0.5%. In some cases rates would double, adding thousands a year!
Happy ending … for some?
There might be a happy ending for the tracker mortgage story; at least for some customers. The impressive Andrew Tyrie, chairman of the Commons Treasury subcommittee, raised concerns with Martin Wheatley, head of the new FCA. As a result, the FCA says that “the bank … volunteered that they would exclude customers from the change where there is evidence … that the customer could have been led to believe that the differential was for the ‘life’ or ‘lifetime’ of the product.”
Back to the ‘small print’ issue. That bank claims that all the affected customers were issued with contracts “clearly stating that it could change the margin.” However, they have declined to show examples of the terms and conditions to the newspaper. I wonder why.
I don’t know as much of this case as I’d like but, if half of this story is true, I’m tempted to ask the bank a variant of the time-honoured question. For example: “Which part of the phrase ‘lifetime tracker’ did we misunderstand?”
What does this mean in practical terms? For example some customers will see their rate jump from base rate plus 1.75 points to base plus 2.49 in May and it will jump again to base plus 3.99 points in October. If that’s true then only one word fits: outrageous.
Of course commercial organisations can charge what they like … provided they didn’t promise something totally different; and that seems to be what happened here. A class action against the above bank is being pursued by Justin Selig, of law firm The Law Department. So far 170 complainants are being joined to the action.
All of them thought they were on a lifetime tracker and the lawyer says he’s “seen nothing to indicate otherwise.” Enough said.
WANT TO KNOW MORE?
For the Sunday Times Money article by Holly Thomas, “10 priorities for the new consumer watchdog”: