FCA think it might be OK for lenders to ignore contractual terms

FCA think it might be OK for lenders to ignore contractual terms

11:51 AM, 8th July 2014, About 10 years ago 32

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This week our favourite journalist at The Telegraph (Nicole Blackmore) wrote an article entitled “Should mortgage lenders be allowed to change mortgage terms” FCA think it might be OK for lenders to ignore contractual terms

What an outrageous question you might think. However, it’s not Nicole’s question, it is a question posed by the FCA!

Mark Smith from Cotswold Barristers commented …

“This is the line that worries me most “The FCA stated: “Lenders can change their regulated mortgage contracts after the point of sale without treating their customers unfairly.”

He then went on to add ….

“This is utter rubbish. 

A contract cannot be ‘changed’ by one side without agreement of the other side. A term can be varied only if the contract permits it. This is the whole nub of the argument we are having with West Bromwich Mortgage Company.”

David Lawrenson, a consultant at Letting Focus and an expert on the residential property market responded by writing the following letter to the FCA …..

“Dear Sirs, 

I see at the FCA you are asking for the public’s views on whether mortgage lenders should be allowed to alter mortgage terms and conditions mid term.

Funny that, but I thought a contract was a contract, was a contract – and was for life. I must have missed that in the small print.

Perhaps I should now write to all the lenders I have mortgages with and tell them that due to changes in “the funding environment” (i.e. I fancy a yacht and a racehorse) I will now be paying off their buy to let mortgage loans at rate of 0.1 per cent per annum. How would they like that, I wonder?

How on earth can you, at the FCA, even have the gall to be not upbraiding these lenders, never mind seeking advice from Joe Public on whether they can cheat in this way.

The landlords affected by the West Bromwich and Bank Of Ireland’s decision to cheat in this way was appalling – and you let them get away with it, so now the landlords affected have to go to court to enforce their rights. You really should be ashamed of yourselves and are now seen as something of a laughing stock and stooge for the financial services amongst the landlord community.

These landlords made a bet with the lenders on tracker mortgages – and they won. They often paid high application fee and high initial interest rates to get the benefit of a long term “rest of life” tracker rate later on in the term of the mortgage.

Now the tide has turned and the lenders are losing money, do not like it and would like to wriggle out of the contract.

Tough! They would not let their borrowers wriggle out, so why should they be allowed to.

And you should stand up against lenders – because this is simply cheating. You should not be wasting time asking for consultation on whether or not this is cheating.”

You can read my response in the comments section below the article The Telegraph – LINK HERE

If you would like to express your disgust directly to the FCA their email address is mortgage.dp@fca.org.uk

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Neil Patterson

12:04 PM, 8th July 2014, About 10 years ago

This is a quote from the FCA's own Website:

"How we are governed

The Board sets FCA policy, but day-to-day decisions and staff management are the responsibility of our Executive Committee.

We are accountable to the Treasury and, through them, to Parliament.

We are operationally independent of Government and funded entirely by the firms we regulate.

We are an open and transparent organisation providing information for firms, consumers and others about our objectives, plans, policies and rules.

We also ask the difficult questions, that sometimes regulators shy away from asking, of firms, ourselves and consumers."

Neither the Treasury, Parliament or the firms regulated want another lender to fail !

Are there too many vested interests within the FCA?


12:13 PM, 8th July 2014, About 10 years ago

Stonking letter from David Lawrenson there.

I would pay a fortune to see the look on the FCA faces when they opened that one!

Mark Smith Head of Chambers Cotswold Barristers

12:29 PM, 8th July 2014, About 10 years ago

FCA and FoS are only concerned with 'fairness'.

P118 and CB is concerned with enforcing legal rights for our members and clients, by taking cases to court, before independent judges with no vested interests, acting under clear legal principles with power to enforce their rulings, not looking at some vague notion of 'fairness'.

Romain Garcin

12:49 PM, 8th July 2014, About 10 years ago

Note that, from the article, the FCA does not seem to suggest that lenders could impose changes out of the blue, but rather whether lenders could rely on a mortgage term allowing them.

So what the FCA seems to be considering is whether a contract term permitting to vary other terms is always unfair.

The article contains a chart depicting their approach to such assessment, to quote:

1. Does the firm has a written term in its mortgage contract that states it is able to make change that it wants to make?

2. Is the term that the firm wants to rely upon fair or unfair under UTCCR 1999?


Mark Alexander - Founder of Property118

13:03 PM, 8th July 2014, About 10 years ago

Reply to the comment left by "Romain " at "08/07/2014 - 12:49":

My understanding of contract law is that an agreement to make a new agreement subject to both parties consent is meaningless as that can always be done regardless of whether the original contract mentions it or not.

The issue here is that mortgage lenders HAVE changed the basis of their contracts unilaterally, i.e. without the other parties consent. Our intention is to prove that this is not legally possible. Why the FCA cannot understand or enforce the law as well as the principles based regulation they are responsible for simply beggars belief.

Giles Brown

13:25 PM, 8th July 2014, About 10 years ago

Interesting.......but what can one do?
I am trying to port a BTL mortgage which I took out 10 years ago.
I was living abroad then as I still do now. Woolwich/Barclays quote.....

But what they could do for me is...
and here's the sting...
DEPOSIT £100,000 !!
My rate is 0.89 over base...........ENOUGH SAID.

Romain Garcin

13:29 PM, 8th July 2014, About 10 years ago

Reply to the comment left by "Mark Alexander" at "08/07/2014 - 13:03":

Hi Mark,

Mark Smith said (from your quote): "A term can be varied only if the contract permits it."

From the article and the actual FCA document it seems that the FCA does not say otherwise and their discussion seems to focus on whether such terms allowing variations are fair (and thus valid), though they are not exactly stating that in the clearest way possible.

To quote the FCA document:

"Some lenders may therefore seek to rely on the ‘fine print’ of mortgage terms and conditions which, in some cases, allow them to make variations to their mortgage contracts."

"The discussion is based around whether the level of flexibility that firms reserve for themselves is fair, and what factors may be relevant when we make an assessment of the fairness of a change to a regulated mortgage contract".

John Frith

13:34 PM, 8th July 2014, About 10 years ago

I learned a lot in the last financial crisis. I learned that the "independent" credit reference agencies were not independent. I learned that banks feel they have a divine right to make money regardless of ethics. I learned that banks could legally sell financial instruments that they knew were going to lose money.
I also learned that mortgage companies were just short term traders, who borrowed short term money, lent the money as a mortgage, and then sold the debt on asap so they could start again. So my question is, why do they care what interest rate we are paying, if they've already sold it on to someone (the worst ones to the government)?

PS my recollection of the crisis was that the primary reason for the bank collapse was credit agencies giving A ratings to sub-prime mortgages. But you wouldn't know that now, as the banks have re-written history. It is now received wisdom that the financial crisis was caused by a housing bubble. Nice deflection of the blame.

Adam Hosker

13:36 PM, 8th July 2014, About 10 years ago

It comes down to Contract Law I would have thought which an "FCA Policy" can not change that.

If I remember rightly Privity of Contract means you "don't" have to enforce a contract term; its up to the parties to enforce it. So Lender can ignore it but you can enforce it if you want.

As for changing terms; Its not up to the FCA both parties should agree to contract term. One party can change contact, unless it says they can in that contract but that should include notice and a route to decline.

Put simply; this is over the FCA quango's head.

Mark Alexander - Founder of Property118

13:44 PM, 8th July 2014, About 10 years ago

Reply to the comment left by "Romain " at "08/07/2014 - 13:29":

I agree and that's the whole point.

The contracts exist, the laws exist, the legal principles of contra proferentem apply to ambiguity in contracts (which isn't the case in my opinion with either the West Brom or BoI cases) and yet the FCA are still refusing to step in or even to seek independent legal advice on what the disputed mortgage contracts actually mean. WHY?

Instead the FCA have launched this meaningless and pointless PR stunt which I can only presume is to make them look like consumer champions - they are NOT!

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