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CIBC Sued Over Unclear Prepayment Mortgage Penalties!
So you have mortgage agreement with a financial institution but now, for whatever reasons, you’d like to close the mortgage and payout the amount prior to the agreed day. You fully expect to pay a prepayment penalty, generally assumed to be equal to three months worth of interests, but since traditionally lenders don’t follow a standard formula to calculate the penalties and are often accused of lack of communication and clarity in their contracts, you may be hit with a much higher amount. The exact amount of these penalties are often a source of dispute, the latest example of which is the class action suit recently filed against the CIBC.
Official documents state that “CIBC applied terms and conditions to certain mortgage contracts to allow it unfettered discretion for calculation of mortgage prepayment penalties. It if further alleged that the quantification of prepayment penalties applied by CIBC are in breach of the mortgage contracts.”
According to Ellen Roseman of Moneyville, Mr. Flaherty and the federal government have made promises to standardize mortgage penalties but have not done so just yet. She says that even verbal disclosure to clients is often either non-existent or wrong.
Successful class action suits have been filed against financial institutions before and will likely continue if the government does not follow through with their promise of standardizing this part of the industry.
source: moneyville, classaction.ca
