Skipton Building Society and Bank of Ireland have claimed they shouldn’t be tarred with the same brush as West Bromwich Building Society, as a landlord action group kicked off legal proceedings against them.
Property 118 has announced it will begin legal action against Skipton Building Society and Bank of Ireland in August, after passing its crowdfunding targets.
It reached an initial £60,000 target last week and has since set a second target of £100,000.
The action comes hot on the heels of the group’s Court of Appeal victory against West Bromwich Building Society.
In June, the court found in favour of Property 118, which accused West Brom of wrongly raising interest rates by nearly 2 per cent from December 2013 on some tracker loans without an increase in the Bank of England base rate.
West Brom’s tracker mortgages were sold on the basis that the interest rate would be fixed to the Bank of England’s base rate, which has remained at 0.5 per cent since March 2009.
But the building society said clauses in their standard terms and conditions allowed it the discretion to change the rate to reflect market conditions, even when the base rate remained fixed.
West Brom was forced to repay £27.5m of overpaid interest to its customers.
The group’s founder Mark Alexander explained pre-action protocol letters will be issued to Skipton and the Bank of Ireland next month.
These are the first steps to bringing a civil claim, with the exchange designed to reveal information about the claim and enable parties to settle their differences if possible.
But both the Bank of Ireland and Skipton stated their decision to hike buy-to-let rates was different from the move made by West Brom.
A Bank of Ireland spokesman responded that the West Bromwich case is not comparable, as its offer document and mortgage terms and conditions expressly stipulated that the tracking margin or differential could be varied, and the offer and mortgage conditions documents were consistent allowing for the differential to be lawfully changed, according to the lender’s spokesman.
A spokesman for Skipton also stated that under the terms and conditions of its mortgage offer, the right to remove a standard variable rate ceiling that applied until 1 March 2010 was lawful.
“The recent decision of the Court of Appeal in the Alexander v West Bromwich Mortgage Company case was very fact specific regarding an inconsistency in mortgage documentation,” read a Skipton statement.
“No such inconsistency can exist with Skipton’s documentation because the relevant key terms were very clearly and fairly laid out in only one document, being the mortgage offer.”
Skipton raised the SVR on residential mortgages from 3.5 per cent to 4.95 per cent in March 2010, while the Bank of Ireland increased rates on 13,500 base rate tracker mortgage customers in February 2013.
Property 118 members had previously taken complaints against these lenders to the Financial Ombudsman Service between 2010 and 2015. According to Mr Alexander these complaints were rejected.
He previously told FTAdviser the fact the ombudsman found in favour of the two lenders was what prompted the legal action and called for a re-opening of complaint files in respect of its decision to disregard contractual obligations on their variable rate mortgages.
Mr Alexander is now calling on brokers to support his action group and take the battle to the lenders by getting their PI insurers to back his legal campaign. “The Fos over-ruled claims against the lenders, but their track record suggests they would not be so lenient if claims are made against the brokers involved.
“There only has to be one successful complaint and the floodgates will open,” Mr Alexander added.
He estimated there are 150,000 potential claims against Bank of Ireland and Skipton. “It doesn’t cost anything to complain to the Fos, whereas it may take up to £1m to take this case all the way, so I’m calling on brokers to convince their PI insurers to help avoid something like PPI all over again.”
peter.walker@ft.com
