Bank of Scotland unfairly double billed customers
In his verdict Master Ellison said the bank’s behaviour had been “unconscionable” and said it had caused borrowers to be “plunged into depression”.
The findings could have implications for thousands of Bank of Scotland mortgage holders across the United Kingdom.
McKay said: “The Bank of Scotland is a major mortgage lender in the North through Halifax and many customers will be understandably concerned about this.
“The banks need to clarify just how many customers have been double charged in this way. They also need to make it clear what action they are taking to address this situation. All of this highlights the need for tighter regulation of banks and financial institutions.
“Seven years after the global financial crisis caused by banks it is clear that some banks are still playing fast and loose with the regulations at the expense of customers.”
Master Ellison said the lender was “having its cake and eating it” when mortgage borrwers defaulted on their payments.
He said: “There may not be any fraud involved, but I would certainly not regard this as fair accounting.”
The Housing Rights Service which took the case said if the bank’s practice had gone unchallenged, many borrowers would have lost their homes.
UTV reported that his verdict came in three cases brought by the bank involving claims for house repossessions.
The court had to determine whether the lender can both consolidate mortgage arrears by increasing monthly instalments through a process known as capitalisation, and also rely on the arrears for possession proceedings.
The judge, however, held that mortgages should no longer be regarded as in arrears once capitalisation had taken place.
He said the bank’s practice of unilateral consolidation is much more longstanding and common than initially anticipated.
“It is also impossible to know how many defaulting borrowers were faithfully or unsuccessfully trying to pay an amount each month in addition to the monthly instalment not knowing that they need not do so, that all they had to do is to keep paying the consolidated monthly instalments,” Master Ellison said.
Master Ellison found that the bank’s reliance on extinguished arrears could be described as double-billing.
He added: “Unilateral consolidation with double-billing creates very real problems for borrowers, their advisers and the court.
“To the extent at least of the double-billing, it is unconscionable.”
The High Court case was taken by the HRS with the help of funding from the Public Interest Litigation Support Project.
A Lloyds Banking Group spokeswoman said: “We encourage customers to contact us at the earliest opportunity if they believe that they will be unable to make their monthly mortgage payment. Repossession is always the last resort and we work hard to ensure that we are providing customers facing financial difficulty with the right support to help ease their circumstances and ultimately help to resolve the situation.
“We are currently considering the Northern Ireland High Court Judgment made on 4th August and our position following that Judgement. Once we have fully reviewed the findings, we will respond accordingly.”