Action needed to tackle 'debt farming' of UK consumers in mortgage arrears: launch of Govan Law Centre report

Govan Law Centre (GLC) has found that the average Scottish homeowner in three or more months arrears of their mortgage has £816 added to their account in 'arrears charges' - the bulk of which appear to be unfair in terms of industry regulatory rules - with one fifth of homeowners incurring arrears charges in excess of £2,000. 

As lenders' charging policies apply equally across the country, these figures are likely to be indicative of the general position across the UK. The findings published in a GLC report, entitled 'Debt Farming? - unfair treatment of mortgage customers in arrears by UK lenders', reveal that lenders are continuing to treat mortgage customers in arrears unfairly.

'Sub-prime lenders' continue to be the worst offenders imposing multiple charges most of which are repetitive, unnecessary and excessive. For example some 'sub-prime lenders' can levy some or all of the following charges each month: unpaid direct debit fee £30, arrears fees £45, telemessage fee £25, questionnaire fee £75, referral to solicitors £50, repossession fee, £29.38, litigation management fee £115, and late payment fee £25.

GLC estimate that such charges in current mortgage arrears cases across the UK could represent just under £400m - the bulk of which are arguably unfair and contrary to industry rules. Over the last three years the City regulator, the Financial Services Authority (FSA), has imposed a number of substantial fines on lenders who have failed to treat their mortgage customers in arrears fairly.

GLC is calling upon the regulator to consider requiring both 'sub-prime' and 'prime' lenders to undertake a  review of their active mortgage accounts with a view to voluntarily reimbursing (by way of a credit to the consumer's mortgage account) all of their customers who have been charged unnecessary, unfair, repetitive or excessive charges. To some extent this process is currently happening for the mass misselling of Payment Protection Insurance by authorised firms and financial intermediaries.

GLC welcomes FSA intervention to prevent 'double charging' to Scottish homeowners threatened with repossession

Govan Law Centre (GLC) has welcomed the intervention of the Financial Services Authority (FSA) to prevent lenders 'double charging' Scottish homeowners where court proceedings are re-raised following the Supreme Court ruling in RBS plc v. Wilson and others.

It is estimated that as many as 5,000 cases were requried to be dismissed for want of service of a pre-court 'calling-up notice', with up to 15,000 historic cases potentially affected. News of the FSA's intervention was revealed in The Herald over the weekend.

Govan Law Centre's Jennifer Laughland, who defends mortgage repossessions across Ayrshire as part of a local partnership 'AHAP' service, said: “We welcome the FSA’s intervention on this important issue, particularly as we are now seeing repossession actions, which had been dismissed after last year’s Supreme Court ruling, being brought back to court".

“The clients whom we see facing homelessness through mortgage arrears are generally struggling to pay their mortgage and make ends meet. The last thing they need in these tough financial times is to be billed twice by their bank’s lawyers, through no fault of their own. The FSA’s action here will protect some of the most vulnerable homeowners in Scotland.”

FSA takes UK banks to task over complaints handling

The Financial Services Authority (FSA) is taking tough action after finding weaknesses in five banks handling of customer complaints. It is understood the worst UK banks as regards complaint handling include Lloyds TSB (Bank of Scotland), Barclays, Royal Bank of Scotland, and Santander (the former Abbey National).

As a result of the review, five banks are undertaking major changes to the way they deal with complaints and two of the five banks have been referred to enforcement for further investigation. The review looked at several banking groups responsible for over 70% of the complaints firms receive and report to the FSA and over 60% of those resolved by the Financial Ombudsman Service (FOS).

It found poor standards of complaint handling within most of the banks assessed, including:
* A lack of senior management engagement and accountability for the delivery of fair complaint handling;
* Poorly designed staff incentive schemes that made branch staff reluctant to pay redress to customers, even in situations where the bank was at fault;
* Poor quality complaint handling by staff in branches and general call-centres leading to inadequate investigations, poor decision making as to the outcome of the complaint and unsatisfactory correspondence with customers;
* Complaint handling procedures that led to staff issuing multiple, repetitive responses to customers, forcing them to restate their complaint a number of times in the face of ongoing negative responses from the bank;
* The failure of banks to learn from previous complaints and to make changes to prevent similar complaints arising in the future.

Further information is available on the FSA's site here.

GLC solicitor joins FSA Consumer Panel

GLC's Mike Dailly has been named as one of four new appointments to the Financial Services Authority's (FSA) independent Financial Services Consumer Panel (FSCP).

Mike, who has 15 years experience as a practising civil court solicitor in Scotland, protecting consumers' rights and tackling social disadvantage, will assist the panel in its continuing role of advising the FSA on the interests and concerns of consumers.

Of the other appointments, Kay Blair has been a member of the FSCP since 2006, and has been confirmed in her appointment as vice chairman, taking over from Adam Phillips who was made chairman earlier this year.

Bill Martin is an experienced macroeconomist and was chief economist at the fund management arm of the Swiss bank UBS.

Claire Whyley is a professional researcher, policy analyst, and consumer champion. She was head of consumer futures at the National Consumer Council until the end of 2008.

FSA chairman, Adair Turner said: "The Consumer Panel has an extremely valuable role to play in ensuring the FSA takes the consumer interest into account in its work.

"We are very pleased that, as these latest appointments demonstrate, the panel can call on an extensive range of expertise."

Full details here; Financial Services Consumer Panel website.

Share on Facebook