Not upheld: early repayment charge (ERC) fairness complaint against TSB Bank plc

Decision detail

Summary

Mrs E and Mr E complained about an early repayment charge of approximately £6,300 incurred when they repaid their TSB mortgage early in November 2025, just four months after completion. They had been forced to sell their property following separation and were unable to port the mortgage to a new property due to a failed affordability check. The ombudsman found that TSB was contractually entitled to charge the ERC as a reasonable pre-estimate of costs under FCA rules, and that the complainants' circumstances, while unfortunate, were not exceptional enough to warrant different treatment from other customers in similar situations. The complaint was not upheld and no remedy was ordered.

The Ombudsman's reasoning

The ombudsman applied MCOB rules which permit lenders to calculate ERCs as reasonable pre-estimates of costs resulting from early termination, calculated on a group basis rather than individual basis. The ombudsman found that TSB was entitled to charge the ERC as a contractual term and that the complainants' situation, while sympathetic, was not exceptional. The ombudsman noted that many customers must sell properties within fixed rate periods for various reasons, and it would be unfair to treat these complainants differently. The ombudsman also noted that the complainants had sufficient equity to cover the ERC, so it did not act as a barrier to the sale.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website