Penalties for early loan pay-outs draw complaints
7/12/2004 17:39
Wendy Zhang/ Shanghai Daily news
The penalties
charged by domestic banks to people returning housing loans ahead of schedule
have raised disputes, today's Oriental Morning Post reported.
The recent
interest rate hikes have encouraged many people to re-pay their loans in
advance, especially for mortgage holders.
When she decided to return her
housing loans in advance to the Bank of China, Yu, a Shanghai resident, was told
to pay an additional monthly interest rate as a penalty .
"I decided to
return the loans to two banks ahead of schedule- China Minsheng Bank and Bank of
China (BOC), but I received two quite different replies," Yu said, "I can return
the loans to Minsheng anytime I like without paying penalties, while BOC asked
me to pay an additional one-month of interest as a penalty," she pointed
out.
Therefore, Yu complained to the consumer's protection commission in the
Pudong New Area, which supported Yu's viewpoints. The BOC had deprived Yu's
freedom to return the loans in advance, according to the commission.
However, the Bank of China held a different view. "The People's Bank of
China has authorized all the banks to establish their own lending regulations,"
said a spokesman with the BOC, adding that preventing mortgage holders from
returning loans in advance might bring more risks to the banks.
Consumers can
select different banks with different lending regulations in the light of their
own requirements, he stressed.
For property lending contracts effective for
less than one year, the BOC will charge an additional one-month of interest as a
penalty for early pay-off, and the Industrial and Bank of China will charge five
percent of the remaining principal as penalty.
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