Scotia Slams Client With 30,000.00 Penalty

Posted on April 6/2011 by

Here’s another Mortgage Penalty nightmare… CBC’s Kathy Tomlinson reported that one Scotiabank client had his penalty double over the course of 9 months. They first quoted him a penalty of $13,000 on a mortgage that was over $400k…

In November, he sold his condo and when he went back to the Scotiabank branch, his personal banker said his penalty was now $33,000….!! Yikes! The borrower was floored, to say the least… How could this happen.. ?

Well, the Banks have been getting away with this for over a decade… (here’s a link to an in-depth study that we did in January that explains in detail how they do it and why it’s not right and needs to be challenged.)

In the end, by the time the client closed his sale, the penalty had dropped to $30,000 (because interest rates went up) and Scotiabank discounted this by another $5,000 for a total penalty of $25,000. It was their gesture of goodwill according to the article…. (I’m sure that made the client feel much better.. it’s like saying, “drink this glass of poison kool-aid… no wait…you only need to drink half that glass….It will still kill you but it’s our goodwill gesture.”)

And here’s something I picked up in the article that should be addressed… the client said he was 2 years into a 5 year blended fixed rate at 5.19%…that means he either refinanced his mortgage or early renewed… that rate of 5.19% is extremely high… Discounted rates in April 2009 were around 4.19% and falling… This also would indicate that he may not have received a fully discounted mortgage rate. And if that’s the case, then how could he be charged this enormous penalty? I would love to see the paperwork on this penalty calculation…

Come on Federal Govt…. you promised to standardize mortgage penalties over 14 months ago… what are you waiting for? Canadians need this now… not when the economy is strong and interest rates go up… Make the changes now…

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