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APPG challenges Co-operative Bank over treatment of mortgage prisoners

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  • 24/02/2022
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APPG challenges Co-operative Bank over treatment of mortgage prisoners
The All Party Parliamentary Group (APPG) on mortgage prisoners has written to The Co-operative Bank, the Financial Conduct Authority (FCA) and the Financial Ombudsman (FOS) to act on the behalf of borrowers who have seen a series of rate increases over the years.

 

The action is in relation to customers of financial services firm Mortgage Agency Services No.5 (MAS5), which is owned by The Co-operative Bank.  

MAS5’s standard variable rate (SVR) has risen four times between 2009 and 2012, increasing from 2.99 per cent to 5.75 per cent over the period. 

MAS5 said the increases were to reflect changes in the cost of funding. 

The APPG and the FOS are claiming that MAS5 has treated customers unfairly and said the increases were not in line with the terms and conditions of the mortgages. 

In July 2009, the SVR rose by 0.75 per cent to 3.74 per cent, then in October that year went up again to 4.5 per cent, a 0.76 per cent change. 

In March 2011, the rate was increased by 0.75 per cent to 5.25 per cent. It rose again in May 2012 by 0.5 per cent to 5.75 per cent. 

The group said an investigator for the FOS claimed that MAS5 “had not provided any evidence to show that the costs of funds it used in its business increased”. In relation to the 2011 and 2012 SVR increases, it said “[MAS5] hasn’t provided anything that relates specifically to MAS5’s own costs, or how these might have changed”. 

APPG is asking the Co-operative and MAS5 to share the information it submitted to the FOS about MAS5’s funding costs, cut the SVR to 2.76 per cent and immediately halt repossessions. It is also asking the firms to pay redress to MAS5 customers for the overpayment of interest and give them access to The Co-operative’s fixed rates using the FCA’s amended affordability assessment for mortgage prisoners. 

It is also asking the firms to stop imposing confidentiality agreements on customers prohibiting them from sharing details of their complaints and misconduct with the FCA. 

A spokesperson for The Co-operative told Mortgage Solutions: “Today we received a letter from the APPG on Mortgage Prisoners and we intend to review this and respond in due course to the APPG on the matters they have raised.”

 

Regulatory resolutions 

The group has called on the FCA to open an investigation into the SVR increases during 2009 to 2012. The FCA has also been asked to order MAS5 to reduce the SVR, halt repossessions and pay redress to customers.  

The group also wants the FOS to stop customers’ homes from being seized until complaints has been assessed. 

Additionally, it has asked the FOS to review its decision to suspend the consideration of complaints made about MAS5 and reopen cases where it has been suggested that a wrong conclusion has been reached. 

Issues raised by these cases should be reported to the FOS/FCA Coordination Committee with minutes published to aid accountability, the group said. 

Seema Malhotra MP, co-chair of the APPG on Mortgage Prisoners said: “The Financial Ombudsman’s investigator concluded that the SVR increases by Mortgage Agency Services No.5 (MAS5) Ltd were unfair and not in line with the terms and conditions of the mortgage. These unfair increases have had a devastating impact on customers.

“We hope that The Co-operative Bank will start living up to its ethical values and pay redress to the customers who have overpaid due to the misconduct. The FCA and the FOS need to intervene to protect these customers and stop MAS5 from dragging out these cases and causing more misery to vulnerable people. Many of these customers have serious health issues or financial problems.” 

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