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Fears over accuracy of early redemption charges

Concerns have been raised by sourcing systems about the accuracy of early redemption charges included in key features illustrations.

Tolerance is not permitted in relation to calculations of early repayment charges which the FSA expects to be penny-perfect.

Lenders have been acc-used by the FSA of being “self-defeatist” for not providing detailed technical information enabling accurate KFIs to be produced. This means sourcing systems will not be able to offer accurate KFIs for those lenders&#39 products. The result will be that lenders will either lose business or provide the KFIs directly to intermediaries.

Mortgage Brain has raised the issue with the FSA but says it has not accused lenders of being “uncooperative”. Chief executive Mark Lofthouse has asked the CML to help resolve the issue.

The FSA highlighted areas in which sourcing systems have reported difficulties. Some lenders round figures to the nearest penny whereas others round them to the nearest £1 or £5. Some lenders round figures up while some round figures down. Lenders also make different assumptions of the number of days in a month.

Lofthouse says: “Since the publication of the final rules, we have been discussing the accuracy requirement of early redemption charges with the FSA and these discussions are continuing.”

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