some general points

unfair terms
We have already mentioned the Unfair Terms in Consumer Contracts Regulations in the context of downgraded savings accounts. But they apply to all consumer contracts entered into from 1 July 1995.

Some firms seem not to understand how these regulations work. If a contract term does not comply with the fairness test in the regulations, it is not binding on the consumer at all – even if the firm later offers a concession that, if it had been in the contract, would have made the term fair.

example
Mr P took out a mortgage. The interest rate was fixed for five years. In return, Mr P was required to pay an early repayment charge if he paid off the mortgage within five years. When, within the five years, Mr P did try to pay off his mortgage, the firm demanded a charge of £25,000. After much furore the firm offered to cap the charge at £12,000.

The charge was to be calculated by reference to movements in market interest rates. But it was described in terms that a customer could not understand. It was said to cover the firm against any adverse movement in interest rates, but it actually produced an early repayment charge even if interest rates did not move at all.

Our adjudicator thought the early repayment charge was unfair under the regulations. In view of this, the firm allowed Mr P to repay the mortgage without charge, rather than push the issue to an ombudsman’s final decision.

blaming the solicitors
When a customer takes out a new mortgage at the same time as buying a house, the lender usually asks the customer’s solicitors to act for the lender as well. The solicitors undertake some obligations to the lender, including confirming to the lender that the legal title is all right. The solicitors have two clients – the customer and the lender – and can only go on acting if there is no conflict of interest between them.

Some lenders seek to overcome deficiencies in their documentation or procedures by including a catch-all clause in their mortgage instructions, making the solicitors responsible for explaining everything and for making sure everything is done. If something goes wrong (even if the lender was at fault), the lender then says the solicitor should have sorted things out – and the customer should claim against ‘his’ solicitors rather than against the lender. But that does not actually get the lender off the hook. In fulfilling the mortgage instructions, the solicitors are acting as the firm’s solicitors, not the customer’s solicitors. And, as far as we are concerned, this does not absolve the firm from deficiencies for which it was actually responsible.

dealing with advisers
If a customer submits a complaint through an adviser, firms rightly insist on written authority from the customer before discussing confidential information with the adviser. But they do not always think ahead to what the position will be if they issue a final response or deadlock letter.

example
Mr Q complained to the firm. After a while, his accountant took over the correspondence. The firm refused to correspond with the accountant until Mr Q gave written authority. That authority simply said that the firm could disclose information to the accountant. It did not make the accountant Mr Q’s agent for all purposes.

Eventually, the firm issued a deadlock letter – which it sent to the accountant. The accountant did not pass it on or tell Mr Q about it. So Mr Q was not out of time when he presented his complaint to us a month after the expiry of the six-month time limit quoted in the deadlock letter.