FCA’s BOI findings incorrect
This assertion came from Landlord Action solicitors which said that the FCA’s conclusion, published in a letter sent to Andrew Tyrie MP by Wheatley, chairman of the FCA, was based on information provided to it by the bank, some of which is not correct in the case of the borrowers represented by Landlord Action.
The bank assured the FCA that it would only proceed with the increase where its ability to do so was clear from the documentation and where the relevant clauses were included in both the mortgage contracts and mortgage offer documentation. Landlord Action claims this was not the case.
Justin Selig, solicitor and partner at Landlord Action, said: “We have received over 300 complaints from people who were not aware that the bank was entitled to make this increase.
“We have carefully reviewed the documentation provided by the bank and have concluded that, whilst in most cases, there is mention in the offer documentation of the bank’s ability to increase the differential there is insufficient information provided as to what this means or in what circumstances the bank is able to do this.
“Further, in many cases, the offer documentation does not contain the relevant terms but instead the bank seeks to incorporate them by reference to the current general mortgage terms and conditions.
“These general terms and conditions were not provided to the borrower with the offer letter but with the mortgage deed after the offer letter had been signed and contracts exchanged for the purchase of the property. In some cases our clients do not recall ever having received a copy of the relevant mortgage terms and conditions.”
The FCA concluded it was satisfied that the bank had waived its requirement to pay an exit fee if borrowers chose to remortgage and that it had therefore complied with one of the requirements of the Unfair Terms in Consumer Contract Regulations 1999.
But Selig said the bank still requires those who are remortgaging to pay an administrative fee. Furthermore the assumption is made that borrowers can actually remortgage and he said it is likely that in a large number of instances borrowers would not be able to remortgage with another lender.
And Selig disagreed with the FCA’s final point that the bank had stated that customers would be exempt from the increase if there was evidence to show that they had received communications from the bank which led them to believe that the differential would remain constant for the mortgage term.
He said: “We have seen marketing material issued by both Bristol & West and Bank of Ireland which in our view would lead borrowers to believe that the differential was fixed for the term. Indeed some offer letters describe the interest rate as being “base plus x% for term”. However in none of these cases have the bank agreed to reverse the increase.”
The firm noted that Martin Wheatley’s letter was sent before the FCA had received Landlord Action’s detailed submission based on its test case.
Last week the FCA said it is considering Landlord Action’s submission and it expects a response by next month.
Landlord Action is still to hear from the Financial Ombudsman Service which is also looking into this.
Selig added: “Finally none of the above rules out the ability of borrowers to take legal action in their own names against the bank. Obviously this action will be more costly but given the large number of borrowers who have committed to fighting the increase the costs can be brought down significantly.
“Indeed the FCA in its letter did suggest that this might be an option for borrowers to take.”