Financial Ombudsman rules credit checks should include income drop on retirement and sets zero mortgage interest rate for Glasgow couple

A retired Glasgow couple who faced the repossession of their home from an unaffordable secured loan have been successful in a complaint to the Financial Ombudsman Service. The couple had been advised to refinance and consolidate secured and unsecured loans with Black Horse Ltd over a longer period and at a APR of around 15% two years prior to retirement. The couple had substantial equity in their home but found that their income dropped significantly two years after taking out the loan in 2008 upon retirement. They approached Govan Law Centre when threatened with repossession in relation to their second charge secured loan.

GLC's Principal Solicitor, Mike Dailly, argued that the lender ought to have fairly considered the couple's income on retirement given that the affordability check under the Consumer Credit Act 1974 took place two years before retirement; and any reasonable creditor would have considered the affordability of the loan not just when the customer was in full employment aged 64; particularly so given that this was a loan secured on their home. The lender objected to this line of reasoning, but the Ombudsman agreed and held as follows:

"I think that it would have been reasonable for Black Horse to ask when Mr B was going to retire and what his income would have been ... If Black Horse had obtained details of Mr B's retirement income, (and taking into account Mrs B's income) I don't see how it could fairly have lent Mr and Mrs B the amount it did - the loan was always going to be unaffordable once Mr B retired".

The Ombudsman ruled that the lender should charge no further interest on the couple's secured loan and restructure it to enable it to be repaid at £200 per month.

GLC's Mike Dailly said: "This is a fantastic outcome for our clients, and means an unaffordable loan can now be repaid on an interest free basis, averting the threat of repossession proceedings and homelessness."

"We also think other consumers can use the reasoning underpinning this decision because there is a worrying practice across the UK of some lenders targeting 'equity rich, income poor' customers, whereby unaffordable loans are secured on the value in the consumers' homes."

"This ruling by the Financial Ombudsman Service makes it clear that UK lenders have to undertake proper affordability checks and lend responsibly, taking into consideration the customer's income now and if close to retirement, any drop in income at that time".

The final decision of the Financial Ombudsman is available here.

Financial Ombudsman rules credit checks should include income drop on retirement and sets zero mortgage interest rate for Glasgow couple

GLC gives evidence to Welfare Reform Committee on 'No evictions for bedroom tax' petition

Representatives of Glasgow's Govan Law Centre were in attendance at the Scottish Parliament yesterday (12 November 2013) to give evidence to the Welfare Reform Committee on our 'No evictions for bedroom tax' petition, and the proposed Protection from Eviction (Bedroom Tax) (Scotland) Bill.

The session is available to watch via the BBC Democracy site here. A full transcript of the session is available via the Parliament's Official Report here (opens as PDF). The session featured on BBC 2's Politics Scotland here (36 min into show via the iPlayer).

GLC argued the case that it was not economically viable to evict Scottish tenants solely because of the bedroom tax in the short to medium term; that Scottish Government and other promises of 'no eviction for the bedroom tax' required to be backed up with statutory teeth, and ultimately the Scottish Government should use its underspend to off-set the bedroom tax, which was £30m this year; and £53m in 2014/15.

GLC were disappointed that representatives of both the Scottish Federation of Housing Associations (SFHA) and the Chartered Institute of Housing in Scotland (CIHiS) continued to press for the ability to evict tenants notwithstanding they were unable to pay under-occupancy deductions. Both the SFHA and CIHiS paid lip service to tenants not being evicted 'if they engaged' with their landlord. What 'engaged' actually meant was paying the bedroom tax, and the grim reality is that disabled tenants and those on benefits are not able to afford to shoulder the cost of bedroom tax deductions on any sustainable basis.

Very worryingly, both the SFHA and the CIHiS refused to support the call for the Scottish Government to off-set the cost of the bedroom tax in Scotland, thus evidencing that they were in truth content to see Scottish tenants evicted if they were unable to pay bedroom tax shortfalls in their rent.

GLC gives evidence to Welfare Reform Committee on 'No evictions for bedroom tax' petition

GLC publish free toolkit for Scottish homeowners with property factor disputes

Govan Law Centre has published a free tookit for Scottish homeowners who are unhappy with the service received from their property factors (property managers). The free toolkit, supported by the Esmee Fairbairn Foundation, explains the rights of customers in relation to the relevant law - including the Property Factors (Scotland) Act 2011, which was drafted by GLC for Patricia Ferguson MSP - the registration process for property factors, the statutory Code of Conduct, and the new dispute resolution procedure in Scotland.

The toolkit includes illustrative letters of complaint and step-by-step help on how to complete an application to the new Homeowner Housing Panel, with common examples. GLC had spearheaded a campaign over a number of years to regulate the property management industry in Scotland, and provide a consumer-friendly form of alternative dispute resolution for homeowners that had 'legal teeth'.

In 2009, the Office of Fair Trading undertook a market study of the property factor industry and concluded that: 'This is a market that is not working well for many homeowners in Scotland. People often have little or no understanding about their rights, households rarely switch factors, suppliers do not seem to be actively competing with each other and the options for consumers when things go wrong are very limited'. The 2011 Act was the Scottish Parliament's response to these significant problems.

GLC Property Factor Toolkit is available here (opens as PDF). The toolkit was written by GLC's Samantha Brown, solicitor, and Ailie Doyle, Public Legal Education Officer at Govanhill Law Centre.

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GLC publish free toolkit for Scottish homeowners with property factor disputes

GLC publish Updated Bedroom Tax Toolkit

Govan Law Centre's successful and popular Bedroom Tax Toolkit has now been updated to take on board recent successful First Tier Tribunal decisions in Scotland and England, and to explain how tenants who may be unable to pursue late appeals can nevertheless challenge bedroom tax decisions by way of supersession.

The GLC Bedroom Tax Toolkit was first launched on 6 April 2013 and has since been downloaded many thousands of times across the UK, and been used by many advice agencies and campaign groups across the country in Scotland, England, and Wales. You can download a free updated version of GLC's Bedroom Tax Toolkit in PDF format here.  The Bedroom Tax Toolkit is part of GLC's wider public and parliamentary campaign to prevent evictions and human misery from the bedroom tax.

GLC publish Updated Bedroom Tax Toolkit

European Convention on Human Rights bedroom tax victory for severely disabled woman

A Tribunal Judge in Glasgow has set-aside an under-occupancy decision against a severely disabled woman on the grounds that it was incompatible with the appellants rights under Article 14 of the European Convention on Human Rights, read with Article 1 of the First Protocol. GLC believes this may be the first reported successful UK challenge on Human Rights grounds against the bedroom tax.

The woman, with Primary Progressive Multiple Sclerosis, was expected to share a specially adapted bedroom with her husband. The imposition of the bedroom tax had placed the couple in arrears of rent with their housing association landord. Tribunal Judge Boyd held that:

"In terms of section 3(1) of the Human Rights Act 1998 regulation B13(5)(a) of the Housing Benefit Regulations 2006 can and should be read as follows:  "(a) a couple (within the meaning of Part 7 of the Act) (or one member of a couple who cannot share a bedroom because of severe disability)."  Not to so read it would be incompatible with the appellant's rights under Article 14 of the European Convention of Human Rights read with Article 1 of the First Protocol of the European Convention of Human Rights".

"Applying regulation B13(5)(a) as so read, the appellant is entitled to two bedrooms.  Accordingly there should not be an under occupancy reduction of 14% in her housing benefit entitlement from 1 April 2013.”

The Tribunal judge distinguished the present case from the recent unsuccessful judgment of the English High Court in MA, and supported the appellent's position that the English Court of Appeal's decision in Gorry was in point with the facts and circumstances of the appellant:

"The judgement in MA, at paragraph 88, distinguished the ten cases before the High Court under judicial review procedure from the decision in Gorry on the basis that Gorry related to a discrete group; families with children who could not share a bedroom by reason of their disabilities.  This approach was not applied in MA as it was considered that there was no discrete group.  As explained above, the Tribunal considers that the appellant is a member of a discrete group very similar to the group considered in Gorry – a person who cannot share a bedroom by reason of her severe disabilities - and as a result Gorry is the case most in point.  The judgement in Gorry was made by a higher Court that the judgment in MA.  It related to a statutory appeal, as is the case here, rather than a judicial review.  It is noted that there will be no appeal against the decision in Gorry but that permission has been granted for an appeal to be made against the decision in MA, and this appeal is being expedited".

The appellant's solicitor, GLC's Mike Dailly, said: "We are delighted for our client, and believe that this judgment is very robust as there was no dispute on the facts that the appellant was severely disabled and could not share her specially adapted bedroom with her husband. She did not have a spare or extra bedroom, she required her own bedroom to meet her needs as a severely disabled person. We think this decision - which we understand may be the first reported success in using unlawful discrimination and human rights law to challenge a bedroom tax decision in the UK - will be of great significance to other severely disabled people in similar circumstances to our client".

The judgment of Tribunal Judge LD Boyd is published here (with some personal data redacted to preserve our client's right of confidentiality).

European Convention on Human Rights bedroom tax victory for severely disabled woman