Wednesday, August 10, 2022

Mortgage prisoners bring £800million claim against TSB in class action in the High Court

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Law firm Harcus Parker believes former Northern Rock mortgage customers who switched to TSB’s Whistletree brand could be liable for damages over inability to switch and high interest rates — something TSB denies

TSB’s Whistletree brand handled the 27,000 mortgages TSB bought from Northern Rock Asset Management (NRAM) in 2016, with law firm Harcus Parker claiming those customers were being charged “very high interest rates on their domestic mortgages.”

A legal claim for up to £800m has been filed on behalf of TSB customers who believe they are mortgage prisoners of the lender.

The company leading the lawsuit says Whistletree also refused to offer new fixed rate deals “to ensure that customers who were unable to refinance elsewhere were trapped in the ‘Whistletree Standard Variable Rate (SVR)’ from TSB, which was almost double the SVR of TSB”.

However, TSB has stated that it created the ability for Whistletree customers to access product transfers — something they couldn’t do under NRAM ownership — and that since 2016, more than two-thirds of Whistletree customers have either switched to a new product are the provider or took out their mortgage with Whistletree.

The lender added that after taking over the mortgage book in July 2016, it developed a solution to give all Whistletree customers access to product transfers (new fixed and tracker rates), as this was not possible under NRAM.

In April 2017, the Company embarked on a pilot with full rollout of the new Whistletree products to all customers in September 2017 to ensure that no eligible customer would require a reverse rate.

Before these new products went live, all Whistletree customers could apply for TSB products (or at other banks), but would have had to meet the affordability requirements in place at the time.

A TSB spokesman said: “TSB is aware of the possible actions proposed by Harcus Parker and will vigorously defend its position.

“We are committed to treating our Whistletree customers fairly.”

Despite this, Harcus Parker said his Group Litigation Order at the High Court in London, which is likely to be issued in the autumn, could recover potentially overpaid interest and compensation of £800million.

The firm said, “The lawsuits allege breaches of express and implied terms of the mortgage contracts and of the bank’s regulatory duties to treat customers fairly.”

It has been stated that the average Whistletree customer with a £200,000 mortgage that has not been repaid could potentially be claiming £30,000 in overpaid interest, while the same person with a ‘Common Mortgage’ could be claiming around £50,000.

A “Together Mortgage” allowed customers to combine a mortgage with a personal loan, and Harcus Parker has claimed that by transferring these products, they could have earned an interest rate of up to 13 percent without repaying the personal loan.

Harcus Parker trades without a profit and without a fee, which means that nothing is generally charged unless a claim is successful. However, if successful, the firm said it would charge a fee equal to 35 percent of the compensation an applicant receives.

Individuals may also be required to pay out of their indemnity their fair share of any third-party costs incurred by Harcus Parker on their behalf.

In its review last year, the FCA defined mortgage detainees as borrowers who are current with payments and cannot switch when it would be beneficial for them to do so.

This is because they exhibit credit and/or borrower characteristics that are outside of the current lender interest.

It added in its review of mortgage prisoners that there were 195,000 borrowers who had mortgages on closed books with dormant firms.

An inactive entity is either a lender that has stopped lending to new customers (an inactive lender) or is not a lender and may not be regulated by the FCA.

The regulator said most of the switching difficulties faced by mortgage prisoners relate to the fact that major changes were made to lending practices during and after the 2008 financial crisis, meaning a number of people who are considering their mortgage before Borrowed in 2008, found their loan, or Borrower characteristics no longer matched lenders’ risk appetite despite being up to date with payments.

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