GLC progresses challenge to mortgage arrears charges under Financial Services and Markets Act 2000

GLC has settled litigation against a 'sub-prime' lender in relation to 'administrative charges' imposed when their customers went into arrears of their mortgage. The following charges were applied on a repeat or monthly basis:  ‘Unpaid Direct Debit Fee’ (£25), ‘Arrears Management Fee’ (£50), Late Payment Management Fee (£25), and ‘Litigation Management Fee’ (£115).

Utlising the Financial Services and Markets Act 2000 and other legislation, GLC secured a refund of 75% of the 'administrative charges' imposed historically, a figure of just under £1,000, together with legal expenses. If this was replicated across the current UK 'sub-prime' mortgage book, GLC has estimated around £150m could be refunded to UK consumers; with a similar figure in relation to 'prime' mortgage book.

GLC's Mike Dailly said: "Govan Law Centre has been developing and testing innovative legal arguments as a means to challenge the imposition of unnecessary and unfair mortgage charges where UK consumers are in arrears. We believe the law is on the side of consumers, and we will continue to refine our legal strategy with a view to disseminating free information to empower UK consumers, and facilitate access to justice".

GLC progresses challenge to mortgage arrears charges under Financial Services and Markets Act 2000

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.

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

GLC challenges excessive mortgage charges

Govan Law Centre (GLC) is raising a number of actions seeking repayment of excessive and unfair fees applied by lenders when homeowners fall into mortgage arrears.

The worst offenders are 'sub-prime' mortgage lenders who typically levy four types of monthly fees: ‘Unpaid Direct Debit Fee’ (£25), ‘Arrears Management Fee’ (£50), Late Payment Management Fee (£25), and ‘Litigation Management Fee’ (£115).

GLC believes these fees do not reflect the actual administrative cost to lenders, and if so, are contrary to legal rules made by the Financial Services Authority (FSA) under the Financial Services and Markets Act 2000. Separately, many of the charges are unfair or excessive to consumers in terms of FSA rules.

Several sub-prime lenders have already been fined by the FSA for failing to treat mortgage customers fairly. In October 2009, GMAC-RFC was fined £2.8m, while in December last year the Kensington Mortgage Company Ltd was fined £1.22m for the unfair treatment of its customers in arrears.

GLC's Principal Solicitor, Mike Dailly said: "Although some lenders have already been fined for excessive mortgage arrears charges, the reality is such charges have simply been added to customers' mortgage accounts. Lenders should voluntarily refund excessive charges, but they won't, which is why GLC hopes to establish a quick route to refunds for our clients".

GLC challenges excessive mortgage charges

GLC to launch series of financial services test cases

Govan Law Centre (GLC) will be launching a series of financial services test cases, commencing with a case seeking a refund of legal expenses in a Scottish mortgage repossession case where no calling-up notice was served prior to litigation.

Other cases (with UK wide applicability) will include court actions to recover charges for mortgage arrears management, litigation management and associated charges.

This is in addition to our current unfair UK bank charge litigation (which tests ss.140A and 140B of the Consumer Credit Act 1974 and regulation 5 of the UTCCR on non-price fairness grounds).

GLC would be interested to hear from anyone in Glasgow who has incurred a number of current account overdraft charges during 2010 and/or 2011 with a view to us seeking to recover these for free using new legal research; please contact 0141 440 2503 in strict confidence.

More details to follow in due course.

GLC to launch series of financial services test cases

Treasury Committee challenges mortgage arrears fees

The House of Commons Treasury Select Committee has attacked the way some mortgage lenders levy high charges on customers who fall into arrears.

The Treasury Committee said this practice was "intolerable" and demanded that the Financial Services Authority (FSA) put a stop to it.

The committee also said some lenders were breaking the rules by using repossession as a first, rather than last, resort with borrowers in arrears.

The FSA said it would publish proposals this autumn after a widespread review. Full story on BBC Business here. See GLC's mini-site on mortgage arrears charges here.

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Treasury Committee challenges mortgage arrears fees