The Financial Services Authority has been accused of being a paper tiger for not taking a firm stance against lenders that charge unjustifiably high exit fees.
Since its decision last September to look into increases in mortgage exit fees the FSA has slammed some lenders for not making these fees clear on mortgage contracts when borrowers initially take out loans.Alliance & Leicester is one lender that has come in for severe criticism for upping the fee it charges. In May, A&L fixed its exit fees at 295 so borrowers know how much they have to pay to redeem their mortgages early in the initial stage of the loan process.Sally Lauder, spokeswoman for A&L, says: “We are aware of the work the FSA is undertaking at the moment. We took the decision to fix our fees to add transparency after listening to customer and broker feedback. So far we have received plenty of positive feedback.”The regulator says a number of mortgage contracts are not as clear as they could be when it comes to explaining which costs will be charged to consumers at what stage of the loan.The FSA is asking lenders to consider whether their terms are unfair and to provide it with evidence of how the decisions to raise their exit fees were taken.It expects to receive responses in the next few weeks and will publish its findings in the autumn.Danny Lovey, proprietor of The Mortgage Practitioner, is among many brokers who feel that the regulator’s stance is not tough enough.He says: “The FSA has to act decisively and tell lenders that exit fees must be justified according to the amount of work involved. If it lets lenders get away with these extortionate exit fees it is nothing better than a paper tiger.”Robin Gordon Walker, spokesman for the FSA, says: “This process is ongoing and we expect to receive responses from lenders regarding their exit fees over the next month.”