Nick Gardner, director at Chase de Vere Mortgage Management, said lenders use the levy as a means of making a profit and called for greater transparency in how the money is used. He said if lenders used the fee to pay an insurance premium to protect against the consumer defaulting, this must be made clear.
He said: “The FSA is making a big fuss about exit fees yet this is the real scandal. The HLC is an optional charge levied by lenders that in no way benefits the borrower. It protects the lender against defaulting borrowers, and the insurer can still chase the borrower and make them repay the loan. If the lender does indeed pay a premium to an insurance company, everybody has a right to know exactly how much that premium is, and how much of the HLC, if any, is profit.”
Opinion on HLCs is divided among lenders. Alex Hammond, PR manager at Kensington Mortgages, said: “The insurance policy doesn’t cover the borrower but they pay for it and we think it is unfair as it is forcing the customer to cover the lender’s back.”
However, Alan Cleary, managing director at edeus, said: “HLCs are totally transparent on the Key Facts Illustration and the reason some lenders charge them is to protect the risk at the higher end of the lending scale. If clients do not want to pay them, they can go elsewhere.”
Robin Gordon-Walker, spokesperson at the FSA, said: “Charges issued by lenders are discretionary and we do not get involved in this area. This is standard industry practice in a very competitive market and consumers and intermediaries should ensure they shop around to get the best deal in all circumstances.”
