AFM publishes guidelines for early mortgage repayment charges: ABN AMRO’s response

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The new regulations for mortgage loans introduced on 14 July 2016 changed the rules for calculating the costs that mortgage lenders may charge retail clients for early mortgage repayments. The Netherlands Authority for the Financial Markets (Nederlandse Autoriteit Financiële Markten, ‘AFM’) has now drawn up a set of guidelines for mortgages lenders with principles for calculating the early repayment charge. These guidelines were published today (20 March 2017).

Banks sometimes require a charge from clients who wish to repay some or all of their mortgage ahead of schedule. Previously, the terms that ABN AMRO applied were those that were set out in the mortgage contract between the client and the bank. Click here for further details.

The AFM has drawn up these new guidelines with constructive input from various parties, including ABN AMRO, on how to interpret the rules that were introduced on 14 July 2016. The interpretation is set out in the guidelines published today.

This interpretation may impact clients of ABN AMRO who paid a charge between 14 July 2016 and 20 March 2017 for early mortgage repayments or for opting out of an interest contract. The bank will now review whether those charges were calculated in accordance with the principles of the new guidelines. If the charge was too high, the bank will refund the difference to the client. If the review shows that the bank’s charge was correct or too low, the previous calculation will stand and the previous charge will remain unchanged. No action is required on the client’s part.

ABN AMRO expects to pay out a total sum of around EUR 5 million to an as yet undefined portion of the approximately 15 thousand clients who paid a charge between 14 July 2016 and now.

Starting today (20 March 2017), the amounts charged to retail clients will at the minimum match the principles in the guidelines drawn up by the AFM. While this will most likely not cause any difficulties, the possibility remains that until 25 March technical issues will cause a very small number of incorrect calculations to go out to clients. We are aware of this problem and will immediately notify any clients who are affected and remedy the situation.

The principles set out in the guidelines also apply to loans to our own people. ABN AMRO is currently investigating how the guidelines impact the calculation of early repayment charges under employee schemes. It is important to us that we handle this matter with the utmost care.

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