The FSA is responding to recent concerns that MEAFs had been increased unfairly, so consumers were being charged higher exit fees than they had expected to pay. Lenders often charge MEAFs when borrowers pay off their mortgage or switch to another lender to cover the staff and other costs involved.
Clive Briault, managing director of retail markets at the FSA, said: "We expect that these measures, agreed with the Council of Mortgage Lenders, will stop borrowers from being surprised by unexpected increases in these fees. People will now know when they sign up for a mortgage what fee they will pay on exit, or should be given a clear idea of how the fee might be increased fairly."
The FSA’s views are set out in a Statement of Good Practice issued under its powers as a qualifying body under the Unfair Terms in Consumer Contracts Regulations.
Key points are:
Current customers: Lenders will have to decide by 28 February 2007 which of the following outcomes they will adopt for their current customers:
- charge no MEAF;
- charge the original MEAF;
- charge a revised MEAF; or
- charge their current increased MEAF.
Past customers: The FSA expects lenders to treat past customers who complain about the level of the MEAF they were charged when they exited their mortgage contract in the same way as the firm will be treating comparable current customers. So, for example, if a firm will only charge its current customers the original MEAF, then if a past customer who has paid a higher MEAF to exit complains, he or she can expect a refund of the difference between the actual MEAF paid on exit and the original MEAF.
