GLC campaign for lenders to reimburse unfair mortgage fees in Scotland

Banks are facing compensation claims of up to £30m from Scottish mortgage customers hit by "unfair, immoral and unethical' fees and charges added to their mortgages after court actions were dismissed by lenders for technical reasons. Govan Law Centre's (GLC) campaign to stop Scottish consumers being 'double charged' for mortgage expenses has been reported in The Herald (Sat, 29 December 2012).

GLC believes that the issue here is fairness, and that incompetent or defective proceedings cannot be the fault of consumers; rather it is the responsibility of lenders and their Scottish solicitors. GLC considers it to be unfair, immoral, and unethical for Scottish solicitors and UK lenders to profit twice by 'double-charging' Scottish consumers who are in financial difficulties.

GLC has set up a simple self-help website for affected customers or their advisors to seek free refunds.

The Council of Mortgage Lenders told The Herald that if costs were not added to mortgage accounts "then all customers would effectively end up paying for them, which many would regard as unfair and inappropriate". The Herald's own editorial has argued that this approach "fails to recognise the only fair and appropriate way for the charge to be borne is by the institutions whose incompetence caused the actions to fail". The Herald goes on to argue that:

"Mike Dailly of Govan Law Centre, the solicitor who is leading the campaign to recover the charges levied for failed actions, is entirely justified in condemning the lenders and criticising their solicitors as "unfair, immoral, and unethical" in double-charging Scottish consumers who are in financial difficulties".

Repossession cases which were dismissed in Scotland centre on two significant legal rulings in the UK Supreme Court and the sheriff court that resulted in thousands of repossession cases being aborted: RBS v. Wilson; and NRAM v. Millar & RBS v. McConnell, respectively (GLC represented the defenders in NRAM v. Millar and RBS v. McConnell). 

GLC campaign for lenders to reimburse unfair mortgage fees in Scotland

Lenders new PAR arguments rejected in NRAM, Santander & Nationwide v. Doyle and 4 others

New legal arguments by Aberdein Considine & Co., solicitors on behalf of three UK lenders have been rejected in a Scottish judgement from Sheriff Deutsch at Glasgow Sheriff Court. The judgment pertains to five separate mortgage repossession actions which were heard together earlier this year, with GLC's Principal Solicitor acting for all five defenders.

The 'Doyle judgment' provides helpful discussion on what lenders need to do to satisfy the 2010 Pre-Action Requirements (PAR) Order, with examples of three cases which failed to meet the 'minimum standard' required under the 2010 Order, and two cases which met the statutory test.

The Pursuers' solicitors unsuccessful challenged the ratio in Northern Rock (Asset Management) Plc v. Millar 2012 SLT (Sh Ct) 58, but had also set forward a number of new legal arguments which had not been considered in Millar. A number of new propositions were advanced, including: that the Interpretation Act 1978 did not apply; 'default' was truly under standard condition 9(1)(b); there should be a flexible time for PAR compliance; and that there was no mandatory requirement to comply with regulation 2 of the 2010 Order. All of these arguments were rejected by the court.

The Pursuers' solicitors were able to show that there had been actual compliance with the PAR in two out of the five cases, and accordingly these were continued to determine further procedure, while three actions were dismissed as incompetent. The full judgment is available here (online PDF).

Lenders new PAR arguments rejected in NRAM, Santander & Nationwide v. Doyle and 4 others

GLC backs Scottish Government's position on RBS plc v. Wilson

Govan Law Centre (GLC) supports and welcomes the Scottish Government's decision to take no legislative action in light of the UK Supreme Court's decision in RBS plc v. Wilson and others as the 'right thing to do' in the circumstances. 

While the majority of consultees alleged that the implications of this case would be negative, GLC believes there is no empirical evidence to back up such assertions, and that the Scottish Government was correct to advocate no law reform response, particulary so in the current climate of forebearance and difficult economic circumstances.

GLC's Principal Solicitor, Mike Dailly said: "Calling-up notices are the equivalent of 'default notices' for consumer credit debts and they serve a useful purpose in enabling the debtor to address problems before litigation can be raised. The only difference with a mortgage is the fact it is secured on heritable property and it is therefore entirely consistent to support the requirement for lenders to serve calling-up notices prior to entitlement to raise litigation. It is in the interests of both parties, lender and borrower".

"It is also instructive to note that some lenders and their solicitors did generally serve calling-up notices and did so as a matter of good practice without any difficulty".

"GLC rejects the Council of Mortgage Lenders (CML) assertion that the Wilson decision may not be in the 'best interests' of borrowers. For those with no prospects of retaining ownership or occupancy of their homes a calling-up notice can act as a spur to selling their property with or without their lenders assistance, and for those that need more flexibility to pay their debts the calling-up notice acts as a spur to take advice to set up a repayment solution which the lender would have to explore in any event in terms of the Pre-Action Requirements'.

"What the CML calls 'delay' is in fact a sensible and reasonable opportunity for practical solutions to be brokered and found to enable the mortgage to be paid, arrears cleared and homeowners to retain their homes. GLC is pleased the Scottish Government has acted to safeguard the rights of vulnerable homeowners in Scotland".

GLC backs Scottish Government's position on RBS plc v. Wilson

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.”

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

Scotland ill-prepared for ‘summer repossession spike’ - GLC calls for proactive solutions

While the UK Council of Mortgage Lenders (CML) predicts a 11% increase in mortgage repossessions across the UK in 2011 as against the figure for 2010 [1], there are a number of reasons to think this figure could be optimistic; however there is absolutely no doubt that Scotland is on course for a ‘summer repossession spike’ according to Scotland’s Govan Law Centre (GLC).

The principal reason for the Scottish spike is due to the fact that between 3,000 and 5,000 mortgage repossession court actions had to be abandoned following the decision of the UK Supreme Court in RBS plc v. Wilson and others, at the end of November last year. Many of these cases have had to be re-raised, and these new cases will start to call in court (following the time it has taken to undertake the pre-action ‘calling-up notice’ and the re-raising of proceedings in compliance with the Home Owner and Debtor Protection (Scotland) Act 2010).

In addition, the CML had estimated there were 15,000 historic cases in Scotland where lenders had obtained decree but not enforced it, because payment arrangements were in place; many of these cases will now require fresh court actions as such decrees are no longer sound following the Wilson case [2].

In addition to these Scottish drivers, there are also UK-wide drivers which could not only result in more repossession actions in Scotland, but critically, lead to an increase in the number of cases which are very difficult to resolve:  

1. The UK Government’s decision last October to significantly reduce the level of Support for Mortgage Interest (SMI) for those out of work;
2. The impact of UK Government public spending cuts on jobs, and the wider impact of welfare cuts too;
3. The fact that additional forbearance by lenders – since April 2009 at the request of the UK Government – may now be masking the true number of financially difficult cases; and
4.  The uncertainty over when mortgage interest rates will ultimately begin to rise.

Govan Law Centre’s position is that three urgent solutions are required to help address the expected additional pressure in Scotland:

1. Scrap the restrictive Mortgage to Rent rules introduced by the Scottish Government in March 2009, invest more in the Scheme, and extend this excellent Scottish safety net. In June 2009, we contributed to a report which predicted the Scottish Government’s rules would result in a ‘post code lottery’ for vulnerable homeowners facing repossession with many households rejected due to the restrictive eligibility criteria.[3] A FOI response to Govan Law Centre from the Scottish Government confirms we were correct[4].

For the period 31 August 2009 to 31 August 2010 almost half of the people applying to the Scottish Government Home Owner Support Fund (the Mortgage to Rent Scheme and Shared Equity Scheme) were refused help; out of 719 registered applications, 315 did not proceed.

Worryingly, of those Scottish households turned down for help, 37% were refused help because their home was valued more than the Scottish Government new valuation limit (which is a crude figure based upon the lowest quartile value of houses within a local authority area in relation to the number of rooms); while another 37% were refused help because no local authority of housing association was willing to participate in the Scheme. Clearly, the Scheme is unable to cope with the current demand, never mind the expected significant increase in demand which GLC predicts later this year.

2. Introduce a new ‘Post Repossession Tenancy’ in Scots law so that occupiers whose homes had been repossessed could lease them back from their lender until the properties were sold. At present lenders would be highly unlikely to do this, as they would be granting a Short Assured Tenancy of at least six months, with complex liabilities for repairs etc., However, we know that many properties can take several months or considerably longer to be sold and it would benefit lenders, repossessed occupiers and local authority homelessness departments if former owners could enter into a simple ‘no frills’ tenancy until the property was sold. Former owners who were unemployed or on low incomes would be eligible for housing benefit, and such an initiative would utilise otherwise empty properties in Scotland.

3. Enhance the requirement for early intervention to prevent homelessness in Scotland – we recommend an upgrading of section 11 of the Homelessness etc., (Scotland) Act 2003 to require local authorities to use innovative techniques (such as embedded homelessness triggers within their computerised client contact systems) to detect and prevent threatened homelessness much earlier, and to provide a co-ordinated and holistic response in terms of legal, money advice, welfare rights and social care services.

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[1] http://www.cml.org.uk/cml/media/press/2836

[2] www.cml.org.uk/cml/filegrab/rbs-v-wilson-nw.pdf

[3] http://www.govanlc.com/help_is_at_hand_report.pdf

[4] Scottish Government Housing and Regeneration Directorate written response dated 12 November 2010, from Keith McDowell, HOSF Scheme Co-ordinator for Scotland. 

Scotland ill-prepared for ‘summer repossession spike’ - GLC calls for proactive solutions

Thousands face extra bills as court ruling hits property sales

The Herald reports that "A landmark ruling on repossessions is resulting in the suspension of property sales at the last minute and thousands of Scots facing large bills from banks on top of losing their homes. Almost a week after the decision by the UK Supreme Court effectively ground all Scottish repossession cases to a halt, there are concerns that hundreds of property deals could be halted as a result.

There are also warnings of the impact of the judgment on the cash-strapped courts service, with thousands of cases scrapped and having to come back into the system.  Last night, the Law Society of Scotland called on solicitors to put the brakes on all purchases of repossessed homes until it can be proven it is compliant with last week’s “earthquake” judgment.

Bruce Ritchie, director of professional practice at the Law Society of Scotland, said: “The society’s conveyancing and civil justice committee will be looking at this in detail but our preliminary view on current transactions that have not yet settled is that buyers’ solicitors should be firm about declining to settle the transaction until selling creditors can produce evidence of having followed correct procedure.”

Mike Dailly, of the Govan Law Centre, said he would pursue legal action against the lenders for putting the bill for dealing with the judgment on to his clients. He said: “The question that no-one has asked is ‘who’s going to pay for all this?’ I have no doubt UK banks will do what they always do and pass these costs onto consumers by adding them to their mortgage – which they can do if the costs are reasonable.  “We could be looking at up to £40 million or more. “It’s not reasonable to expect vulnerable Scots facing repossession to pay banks and their lawyers twice for what is essentially their solicitors’ responsibility and failure.” "

Thousands face extra bills as court ruling hits property sales