Wednesday, Dec 03, 2008
Collars invalid if not included in "Key Facts" box
Times: Financial Services Authority says Halifax tracker loans must fall in line with bank rate cuts
The Financial Services Authority said yesterday that more than half a million Halifax customers on tracker mortgages should benefit from further interest rate cuts even though the small print on their loans supposedly prevents them from doing so.
An estimated 550,000 Halifax borrowers with tracker mortgages, which move up and down in line with the base rate, appeared set to miss out on future rate cuts because the small print on their loans allowed Halifax to stop reducing rates once the base rate falls below 3 per cent.
Jon Pain, the FSA's retail market manager, said yesterday that this 3 per cent threshold, or “collar”, could be unenforceable.
Posted by drewster @ 02:34 AM (523 views) Add Comment
9 Comments
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1. sold out said...
From the Article
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"It emerged yesterday that the removal of details of the tracker loan collar from the Halifax mortgage key facts in 2005 was the result of concerns that the FSA raised over the complexity of the Halifax's mortgage documentation. The regulator was worried that the 11-page key facts statement was overblown for a document designed to highlight the key elements of the loan, and asked for it to be trimmed back. The collar detail was one of the items removed and relegated into the smaller print of the larger mortgage document.
A spokesman from the FSA defended the request to simplify the documentation, adding: “It cannot be right that to shorten your KFI you take out something which is required under FSA rules. It is a rule that a collar should be included in a lender's KFI.”
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So the FSA request that the Key Facts Information is too long in 2005 and the 3 percent threshold is removed and put in the small print.
If it was required to remain in the KFI by the FSA's own Rules then why did they not notice in 2005?
What is the point of the FSA?
2. mark wadsworth said...
Well spotted, SoldOut.
3. fjcruiser said...
The FSA has always been a joke IMHO. If you could not get a job in a bank you would go and work for the FSA!
4. drewster said...
I assumed key facts were just half a dozen sentences in a box. Eleven pages (and many more pages of small print) is far too much! How can a mortgage be that complicated?
5. plato said...
I would have thought this "collar"was a very significant Key Fact and therefore should be in Bold print,if anything! What's going on?
6. jack c said...
drewster - keyfacts illustration is a complicated document and house purchase supported by a mortgage is likely to be the biggest financial commitment most poeople will make. If I find the time and you guy's are prepared to meet up a wee bit further North I'll explain in more detail.
In the meantime fjcruiser must be reading my mind as I now intend to apply to the FSA for a job !
7. 51ck-6-51x said...
If the FSA defines what is in the KFI, then when they request one to be reduced in size surely there must be a dialogue between the lender and the FSA about what should and should not be removed or how anything is rephrased.
This would appear to be as much the fault of the FSA, if not more so.
Anyway... I would say that every contractual term should be reflected in the KFI in plain English, and that if one is deemed too long or complex then the underlying mortgage should either be discontinued, or the KFI should simply read: "This mortgage contract has been deemed to complex for a lay person to understand by FSA rules - legal advice must be sought." and the mortgage contract must then be signed off by a solicitor who is responsible for going through the contractual terms with the borrower (which should discourage over-complexity).
8. whostolemyendowment said...
Let's face it...as the BoE rates approach zero....the lenders are not going to give near zero interest rates....otherwise for instance those on interest only mortgages will be quids in, and the lenders do not make any money on the loan....also the lenders are tied in to the libor rate...not the base rate. Let's not delude ourselves that the lenders will ever play fair...but you can bet any savings rates will be reduced!
9. sold out said...
Is It FSA rule that an early redemption fee should be included in the Halifax KFI?
If it is and they took it out of their KFI in 2005, i wonder if i can claim the £3000 back that they took of me in Dec 2006?
Perhaps i should contact the FSA to find out what their "rules" are.
If their going to push the Halifax to change their tracker rate because of this, i may have a claim for my money back.