“People were just flabbergasted at the magnitude of the penalties,” said Mr. Melville, the head of OBSI, who says his organization has had hundreds of complaints about mortgage penalties. “I ran the numbers myself with my banker for my own mortgage and it was substantial.”

The issue has become so large it has now hit Ottawa's radar. In the March 4 federal budget, Finance Minister Jim Flaherty said he will usher in regulations that will standardize how prepayment penalties are calculated and disclosed.

One frequent complaint is that the method of calculating the penalties is confusing. Last year, as interest rates were falling to all-time lows, Michael Davie looked into breaking the mortgage contract on his two-bedroom Ottawa condominium. The 27-year-old engineer, a first-time homeowner, was just two years into a five-year, fixed-rate mortgage of 4.479 per cent, but he suspected that refinancing might be worth it.

He searched his mortgage documents and failed to find it spelled out anywhere. A quick call to the mortgage company revealed that his penalty was the so-called interest rate differential, or IRD. Mr. Davie was charged a $2,500 penalty for breaking his mortgage and refinancing at a lower variable rate, saving himself roughly $300 a month in interest payments.

While mortgage lenders are disclosing the fees, “what we've been seeing is that it's not written in a very clear and simple way,” said Jean-François Vinet, an analyst at Option consommateurs, a non-profit consumer rights group. “It's really hard for consumers to get it.”

In most of the cases it's investigated so far, OBSI has found the bank's disclosure was clear and the customer did not suffer any loss.