Thursday 8 December 2011

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.



  1. 'Lenders': Southern Pacific Mortgage Ltd, Preferred Mortgage Ltd, Southern Pacific Personal Loans Ltd, London Mortgage Company Ltd(whose mortgage loans were bought by SPML).

    These 4 so called ‘lenders’ are all part of the Lehman Bros bankruptcy.

    SHORTFALL: When a borrower has been repossessed and/or evicted, Acenden Ltd(Capstone) then begins the process of effectively, ‘asset stripping’ the borrower from any if not all of the equity in their home. It does this through, what are known as ‘Asset Management’ companies such as Countrywide, Spicer Haart et al. Invariably, this ‘asset stripping’ results in a shortfall in the final settlement figure, payable to SPML/SPPL/PML/LMC thru Acenden.

    PROCESS: This is done through the process of charging ‘multi-level fees/charges’, through Acenden, whilst Acenden continue to levy post repossession/litigation fees, continuation of monthly loan+arrears+interest fees until the property is sold etc. Most borrowers will already well aware of the extortionate charges which are referred to, from Acenden (Capstone) Ltd.

    The Fees/Charges post Repossession/Eviction:
    1)Acenden Ltd has contracts with several ‘Asset Management’ companies, 2 of the largest are Countrywide and Spicer Haart. Once instructed, on the day of the eviction or other, the locks will be changed, inventory taken, the property cleaned etc and then it will be marketed through a ‘local’ estate agent.
    The charges vary from £650+vat to those in excess of £2500+ by these companies, the cost of which is then passed onto the borrower, by Acenden.

    In addition Acenden pays these companies 1%+ (plus VAT) of the final selling price, once your home is sold. Again, that cost is charged to the borrower, by Acenden.

    2)Acenden then say they get at least 2 ‘independent’ valuation from surveyors, to set the market price. One of the valuations is a ‘local’ estate agent.
    The ‘local estate agent’ will ‘market’ your property and you will be charged 1.5%+ (plus VAT) of the final sale price for doing so.

    3)If no offers are accepted by Acenden within say 60 days, Acenden then will drop the price, which further reduces the equity in the property and no doubt increases the shortfall to the borrower. All during this period, monthly loan payments+arrears+interest+’litigation’ fees+’monthly repossession’ fees are continually being added.

    4)If the property is sold, in addition to the charges above, you will be charged by Acenden’s solicitors(Rosling King, Lightfoots, TLT etc) for the conveyance.
    This charge for the conveyance, will £600+ (plus VAT), passed onto you by Acenden.

    5)The valuation of your property by Acenden’s ‘asset managers’, such as Countrywide as being ‘independent’ is somewhat dubious to say the least. Many borrowers are aware that their homes have been undervalued when marketed. One reason is that Countrywide, uses its ‘local estate agent’ Bairstowe Eves., however Bairstowe Eves is a subsidiary of Countrywide.

  2. I appreciated your post and I find your thoughts impressive. Thank you for sharing.

    Charles A

  3. Having read a brilliant article about anAmerican guy who proved that the mortgage money never existed in the first place (ask for a copy of where the money came from in the first place under the banking act, I think 1897
    ) Also a mortgage supplier must match your bricks and mortar with their own. I beleve this is called consideration. If they can't show consideration then the contract will be brought into question I hope this will give some food for thought. There is also the harassment laws.

  4. The post of 29 December 2011 sounds brilliant/intriguing but I haven't been able to Google this successfully. Any ideas where I can find a reference or similar please?

    Many thanks