Israel Bank: Commercial banks will not charge more than one operating fee in the event of early repayment of a mortgage

The Bank of Israel has announced that commercial banks will not charge more than one operating fee in the event of early repayment of a mortgage with banks that provide housing loans. The position was presented at the request of the court as part of a hearing on the application for approval of a class action against Bank Leumi. The bank said it was considering ordering banks to retroactively refund fees already charged to customers so far, in accordance with the court's decision regarding the class action.
Some banks have been charging a number of different operating fees for customers seeking early repayment of mortgages for years, especially if the housing loan consists, as in almost all cases, of different routes of interest rates, linkages and time periods. The meaning of the Bank of Israel's announcement is that the banks must henceforth charge only one operating fee for early repayment of a mortgage, and that no fees may be charged for different routes of the loan.
According to the Banking Ordinance of 1941, the right of a person who received a mortgage loan from a banking corporation to repay the loan before the date agreed between the parties, if the conditions stipulated by law were met.
Pursuant to the Banking Order regarding early repayment of a housing loan taken out after 2002, it was determined that a banking corporation may condition the repayment on the payment of various fees. One of these commissions is an "operating commission" which does not exceed NIS 60.
The issue of the collection of an operating fee for early repayment of a housing loan was discussed in court in a lawsuit against Bank Leumi Mortgage. As part of the hearing on the application for approval of the class action, the Banking Supervision Position was submitted, which was unequivocal, according to which, in case a customer requests early repayment of a housing loan, even if the loan amount consists of several revaluation routes, the bank may charge only one early operating fee.
It was further clarified that this commission is in a fixed amount, which is intended to finance the actions that the bank is required to perform for the purpose of making an early repayment. This is in contrast to the other fees specified in the order, which are intended to capitalize the amount to the early repayment date as part of the risk management of the borrower and the banking corporation, and are therefore derived from the loan amount and interest rates.
In order to ensure that all banks in Israel that provide housing loans operate in accordance with the supervisory position from now on, the Bank of Israel published this position to the public as part of a supervisory letter sent to the entire banking system.
With regard to the reimbursement of operating fees, insofar as they have so far been collected from customers, the Supervisor of Banks noted that it is examining the issue, inter alia, in accordance with decisions to be made on this issue in the court case, which is still pending.