Court case could set a precedent for 200,000 borrowers…
The Co-Operative Bank, in what could be a benchmark case, is contesting the authority of the Financial Ombudsman Service to investigate a complaint that seeks to review the fairness of the mortgage interest rates that the lender charged customer Gwen Davies.
Bloomberg reported that the high street bank has brought a legal challenge before London’s High Court to stop the ombudsman from investigating Davies’s case on the grounds that it is time-barred, according to UK regulatory rules on dispute resolution.
“This judicial review is about whether or not the events complained of are within the ombudsman’s jurisdiction and not on the merits of the underlying complaint,” a spokesperson told Bloomberg.
“The bank is satisfied that the historical variations were applied fairly and in accordance with the terms and conditions of the mortgage contract.”
A parliamentary committee has cited details of the increased borrowing costs Davies faced, with the standard variable rate rising from 2.99% to 5.75% between 2009 and 2012. The Bank of England’s base rate was 0.5% at that time, and many mortgage lenders offered deals at about 2% or 3%.
The case is being closely monitored by other lenders and mortgage prisoners – those who are paying higher-than-average mortgage rates who cannot switch to better deals because of their credit rating.
There are an estimated 200,000 mortgage prisoners in the UK, according to the Financial Conduct Authority (FCA).
Read more: FCA publishes Mortgage Prisoner Review.
UK lawmakers and campaigners have been trying for years to push regulators and the government to require lenders to offer better rates to mortgage prisoner customers.
Read more: Lords vote in favour of capping interest rates for mortgage prisoners.
The FCA made limited changes to affordability rules in 2019 which allowed a few thousand borrowers to switch providers, but that did not change the situation of many people with expensive loans.
The Financial Ombudsman Service has considered other complaints from mortgage prisoners, some of which have led to confidential financial settlements, a person familiar with the matter told Bloomberg.
The ombudsman, which can act on individuals’ complaints on banking, insurance, and investment products, declined to comment on Co-Operative Bank’s legal action, citing the ongoing proceedings.
