Upheld: failure to provide clear explanation of payment application; administrative error in calculation methodology complaint against Topaz Finance Limited trading as Hyalite Mortgages

Decision detail

Summary

Mr M complained that Hyalite Mortgages did not apply his monthly overpayments correctly after his mortgage transferred to them in 2023. Previously, his £125 monthly overpayments reduced his arrears balance by approximately £1,500 annually, but after the transfer, the same overpayments only reduced the balance by approximately £500. The ombudsman found that Hyalite had changed its calculation methodology by excluding arrears when calculating contractual monthly payments while still applying interest to the full balance including arrears, causing part of the overpayments to cover the interest gap rather than reduce arrears. Although Mr M's payments were correctly applied and he suffered no financial loss, the ombudsman upheld the complaint because Hyalite failed to provide a clear explanation for this change, causing Mr M unnecessary upset and inconvenience. The ombudsman ordered £250 compensation but rejected Mr M's request for a £1,000 balance reduction as the payments were applied and not lost.

The Ombudsman's reasoning

The ombudsman found that while Mr M's payments were correctly applied to his account and he was not out of pocket, Hyalite failed to provide a clear and correct explanation for why his overpayments resulted in a smaller balance reduction after the account transfer. The root cause was that Hyalite excluded arrears when calculating contractual monthly payments but applied interest to the full balance including arrears, meaning part of the overpayments covered the interest gap rather than reducing the arrears. This lack of explanation caused Mr M unnecessary upset, frustration and worry, requiring him to bring a complaint to the ombudsman to obtain clarification. The ombudsman rejected Mr M's request for a £1,000 balance reduction as the payments were applied and Mr M was not out of pocket, but awarded £250 compensation for the failure to explain.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website