Unilaterally changing mortgage arrears payment dates leads to trouble

Despite having a payment arrangement to clear mortgage arrears, the borrower complained to Financial Services Complaints Ltd (FSCL) his lender wrongly issued him with a PLA enforcement notice, which included payments that were not in default.

He says the lender acted unfairly by issuing the notice even if repayments were only one or two days late.

A PLA notice is a legal document a lender serves on a borrower before taking serious enforcement action for a default, such as a mortgagee sale.

The borrower claimed he had overpaid the arrears and says the lender was being unreasonable because his business cashflow made the loan payment date difficult. The lender would only agree to moving the date if he made an additional monthly repayment.

Some of the fees applied to the account were also disputed by the borrower, who says they were not legitimate.

The lender gave the client spreadsheets showing all repayments, how they were applied, and why arrears remained.

It says he wasn’t complying with the repayment plan because he made ad hoc payments and changed his repayment date without agreement.

After the borrower complained to FSCL, he made further repayments and cleared the arrears.

However, because he had unilaterally changed his repayment date, he continued to be partially in arrears each month. He says this demonstrated how inflexible the lender was.

Because PLA notices had been issued, he was also charged legal fees associated with the enforcement action.

The FSCL found the lender had correctly tracked the borrower’s repayments and arrears and there was no evidence of overpayment. While the borrower did catch up on arrears during the investigation, changing the repayment date without agreement meant he remained in arrears for part of each month.

A review of the fees confirmed that, under the loan agreement, the borrower was responsible for the lender’s legal costs, including issuing a PLA notice.

Asking the lender whether the repayment date could be adjusted to better match the borrower’s cashflow without requiring an extra payment, he was offered several options, including a discounted fixed-rate option for two years that had been advertised to existing customers. 

After considering the what his monthly repayments might look like if he were able to take up the discounted fixed-rate option, the borrower decided to keep the existing payment date because the new rate allowed him to make smaller monthly repayments.

As a gesture of goodwill and to resolve the longstanding dispute, the lender agreed to waive some legal fees, but required all other arrears to be paid before the borrower could apply for the fixed-rate offer.

It was made clear he needed to meet all future obligations, including regular repayments and council rates.

The lender warned that no further fees or interest would be waived if the borrower fell behind again, saying it had already made concessions during earlier repayment difficulties.

The FSCL says the case is a lesson in a borrower’s financial situation changing and not getting the lender’s approval for any changes to repayment dates or plans. 

“Loan agreements often allow lenders to charge legal and enforcement costs when repayments are not made as agreed. Any waiver of fees is discretionary and not guaranteed if issues continue.”