Following its merger with Skipton, Chesham will no longer offer new mortgages but will have to change its terms for existing customers.
The first term which the regulator deemed unfair – one of three in all – relates to Chesham’s ability to change the initial interest rate on a mortgage to its standard variable rate on a mortgage if a customer breached any of the conditions of the mortgage and allowed the society to back-date the higher interest rate to the start of the mortgage.
The FSA says the clause “could have been used to impose a disproportionately high sum on the customer for not complying with the conditions of the mortgage”.
Chesham has agreed not to backdate any interest rate changes, according to the FSA.
The second term the FSA deemed to be unfair relates to Chesham’s ability to withdraw a mortgage offer it had made. The regulator thought the term gave too much discretion to withdraw a mortgage offer and withdrawing due to ‘any question’ or ‘any event’ may have been too broad.
Chesham has since agreed to limit its discretion to withdraw an offer to cases of fraud, misrepresentation, non-disclosure of material information or title defect and “any other matter which adversely affects the value of the property as security for the mortgage or is inconsistent with the basis on which the mortgage offer is made”.
The final term that the FSA saw as unfair was Chesham’s ability to ask for immediate repayment of the mortgage where the property had been let, even where the firm had given its consent for the customer to let the property.
The FSA says the term was unfair because “it was excessive for the firm to have the discretion to require immediate repayment of the mortgage after giving its consent for the customer to let the property”.
Since, Chesham Building Society has agreed that it will not require immediate repayment of the mortgage where it gives its consent for the customer to let the property.
Law firm Leon Kaye last month filed a formal complaint against parent company Skipton Building Society with the Office of Fair Trading on behalf of borrowers who were hit by its decision to scrap the ceiling on its standard variable rate.