On 20 August last year, Bank of Scotland, part of LBG, was found to have been unfairly double billing customers who fell behind on their mortgages.
The Housing Rights Service which brought the case said if the bank’s practice had gone unchallenged, many borrowers would have lost their homes.
After the judgement, a Lloyds Banking Group spokesperson said the Group believed it was right to consider the issues raised in the judgment and that it was appropriate to temporarily suspend repossession proceedings across its mortgage brands which it did at Christmas.
“We plan to recommence repossession proceedings imminently. For those people affected by this suspension, we will continue, as in the normal course of business, to review each account and work with our customers on a case by case basis – repossession is always a last resort,” said the spokesperson.
The case focused on the way BoS added arrears to the original mortgage borrowing, known as capitalisation, which increases borrowers’ mortgage payments.
The judge ruled that once capitalisation had taken place, the mortgage should no longer be considered in arrears. However, the bank continued to treat such mortgages as in arrears and used that as the basis for bringing legal cases.
The judge said this meant borrowers had been held in fear and were being threatened with repossession on account of an “erroneous and fictional arrears balance”.
He said this meant that “many” court decisions concerning suspended repossession orders had been made on “erroneous assumptions”.