In November 2017, Jesse approached a lender, and took out a $340,000 mortgage over her home. The mortgage was short-term, and was due to expire six months later, on 30 May 2018.
Jesse arranged funds to settle her loan on 30 May. However, on 30 May the lender sent Jesse a settlement statement which asked for significantly more money than Jesse was expecting. Jesse found she did not have the funds she needed to repay her mortgage. She was short by $6,900.
Jesse urgently arranged an extra $7,000 loan. She contacted the lender to say she would have more money available soon, and would be able to settle a week later, on 5 June.
On 5 June, Jesse received an updated settlement statement from her lender. Curiously, the new settlement statement asked for a slightly lower amount than the original 30 May settlement statement. When Jesse asked about this, the lender told her the original settlement statement was incorrect.
Jesse said that if the original settlement statement had been correct, she would have been able to settle on 30 May, and would not have had to take out the extra $7,000 loan. She wanted a refund for the interest she was paying on the $7,000.
The lender’s view
The lender accepted it had made a mistake, but did not think it should be responsible for Jesse’s costs. The lender said that Jesse had requested a settlement statement at very short notice, only one day before the planned settlement date. The company said that any errors in the settlement statement were due to this short timeframe, so Jesse was at least partially to blame for any loss.
Jesse complained to FSCL.
We found that the lender was required to provide accurate settlement statements, whether or not the statements were requested at short notice. The lender would be liable for any loss Jesse had suffered as a result of the inaccurate settlement statements.
When we reviewed the lender’s settlement statements, we found several errors. The lender had not processed several of Jesse’s interest payments, and it had overcharged Jesse for default interest and fees. If the lender’s settlement statement had been properly calculated, the lender would have asked Jesse for $7,100 less on 30 May, and Jesse would have been able to settle.
We also discovered that the lender had charged Jesse $1,121.92 in fees and interest between 30 May and 5 June. We found it was unreasonable for the lender to pass on these charges to Jesse, as the fees and interest were only charged due to the lender’s mistake.
We issued a formal recommendation, requiring the lender to pay Jesse $6,662.07. This $6,662.07 was made up of:
- $4,022.65 which the lender overcharged Jesse
- a $1,121.92 refund for the fees and interest which the lender charged Jesse due to her late settlement
- $517.50 for Jesse’s legal fees incurred arranging the extra $7,000 loan, and
- $1,000 for the stress and inconvenience Jesse suffered due to the lender’s mistake.
We did not require the lender to refund the interest Jesse was paying on her $7,000 loan. Jesse had received the $7,000, and could use it however she liked. We considered it would be unfair to let Jesse have the benefit of the loan, but require the lender to pay the interest.
Insights for participants
Tight timeframes can make it difficult to comply with your obligations to your clients. However, this doesn’t mean that you will be excused for your mistakes. If you are operating under strict deadlines you need to take particular care to ensure your work is accurate.