FSA tells Chesham to change contract terms
Share
The Financial Services Authority has ordered Chesham Building Society to change some of the terms in its mortgage contract after deeming them unfair.
Chesham completed its merger with Skipton Building Society last week which means it will no longer offer new mortgages, but it will have to change its contract for existing customers.
The FSA found three terms in the society’s contract unfair.
The first was Chesham’s ability to change a borrower’s interest rate to the society’s SVR should any of their mortgage conditions not be met.
The FSA ruled this was unfair because it did not consider the extent of the breach and allowed the society to backdate SVR payments to the start of the mortgage.
The regulator says the effect of this rule could have been to impose disproportionately high sums on borrowers.
The second term highlighted as unfair was the society’s ability to withdraw offers at any time without notice.The FSA believes this provided the society with too much discretion to withdraw mortgage offers. It says the power of the society to withdraw a mortgage offer due to “any question” or “any event” occurring since it was made may have been too broad.
In relation to existing customers Chesham has changed its contract so it will only withdraw offers in specific cases.
Third, the regulator found that the term in the mutual’s contract that allowed it to demand full repayment of the mortgage should the property be let out, even with consent, was unfair.
The FSA says this allowed for the society to demand repayment even if it had consented to a property being let out.
The society has changed its terms so that it will not require immediate repayment if it has given consent for the property to be let.
A spokeswoman for Skipton says Chesham never had cause to enforce the terms in its contract but changed them once they were highlighted by the FSA.
She says: “Skipton does not have any of these terms in its mortgage contract so none of our borrowers will be affected by them.”
