BIG BANKS SIMPLY GOUGE ON BANK PENALTIES
Imagine my surprise when I was reading the Financial Post on Saturday and there was an article on big banks and their penalties. In Garry Marr’s (May 8, 2016) article, he wrote of a bank giving a client $150,000 mortgage penalty. At Robert Floris’ Hamilton Office we had a similar experience where a couple separately were charged a $20,000 fee. I am sorry but this is a complete gouge. The next day a couple we were working with was told by our office to investigate what their penalty would be if we financed early. The couple was told $300.00. Imagine our surprise when at closing the lawyer indicated the penalty was $2,000. These examples are not new. A mature woman was told her penalty would be $2500. Again at closing this changed to $12,000. When she went back to the bank (CIBC) she was told there was nothing they can do.
My fellow consumers, I was mad. When I tried to interfere they said it was a privacy issue (it certainly isn’t when they want business). I called their Customer Care department and what happened, after a week I received a call and they gave me a definition of the mortgage penalty calculation. I asked for CEO’s phone number, e-mail or address and I was refused. The banks Gods do not want to be disturbed. I tried the internet, no luck.
So last night I researched this mortgage penalty situation. Many Canadians have suffered this injustice. “BANKS DO WHAT THEY WANT” industry expert Richard Beaumier states (Vice-President of the Political Action Committee) below I will let him quote his feeling towards the Big Banks.
“As a consumer, you will always have a huge penalty – even if the rates are flat, like we have seen since a few years back.”
In a 2010 report, Beaumier wrote that the methods banks use to calculate the penalties lack controls and uniformity.
Beaumier said nothing has changed in the interceding four years.
Beaumier suggests banks are applying a contract the customer willingly signed, but said such penalties are often twice as high as the bank needs to cover its actual costs and foregone revenue.
“This is not a penalty,“ he said. “This is a penalty, plus a cost reimbursement, plus an overcharge.”
Beaumier said it’s in banks’ financial interests for consumers to end their mortgages early and that he believes mortgage penalties make up a significant part of Canadian banks’ profits.
He said American banks manage to remain profitable but have much lower, even non-existent mortgage penalties.
What can I do? Unless a client really wants to be with a big bank, I will advise of the perils ahead.