The Financial Ombudsman Service (FOS) has received dozens of complaints from consumers who have signed up for the scheme with Manchester-based bank WeRe, reveals the Mail Online.
In return for the monthly fee and financial pledge, WeRe promises its customers it will pay off their mortgage balances by issuing cheques in a currency created by the bank called WeRe.
WeRe told customers that under a law dating back to the 19th century, sections 42 and 43 of the Bills and Exchange Act 1882, creditors must write off debt when they receive one of the cheques.
The report highlights the case of one man who tried to pay off his loan balance of £67,500 with The Mortgage Works but had his cheque refused and now faces financial difficulty. FOS said it could not ‘emphasise strongly enough the seriousness of the position’ this placed the customer.
The Financial Conduct Authority sent out a consumer warning in September last year sounding the alarm over the firm’s activities. The so-called bank appeared to be operating as a community or people’s bank so and its activities did not require banking authorisation, said the regulator.
In a statement issued at the time the regulator said it was concerned that vulnerable consumers may be attracted to WeRe Bank’s claim that it would pay off their debts ‘for free’ using Re cheques, even though they have not had to pay any money into an account.
FOS said it could not emphasise strongly enough the seriousness of the position the consumer had been placed in.
The Ombudsman warned consumers not to be tempted to get involved in schemes which sounded too good to be true adding, “there’s no way to magic away money that you legitimately owe”.