Householders in arrears with their mortgages who face having their homes repossessed have reached the end of their financial resources.
An unexpected bill for thousands of pounds due to a technical error by the lender is the last straw.
About 7500 people in Scotland are in this position of having to pay legal fees for an action to repossess their homes that failed because a bank or building society did not adhere to the required procedure.
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Lenders are entitled to charge mortgage holders for reasonable expenses incurred in the legal procedure to repossess a property, as set out in 30-year-old Scottish conveyancing legislation. However, it is difficult to see how such costs can be deemed reasonable where a repossession action has been dismissed because a bank has failed to take all the necessary steps. In these circumstances, such charges would appear to be both unfair and excessive and therefore specifically in breach of the Financial Services Authority's conduct of business rules. Yet it is estimated that banks have reclaimed £30 million in costs of failed actions from customers who could not afford to keep up their mortgage payments.
Is is deeply disturbing that there are now thousands of cases of this sort in Scotland. This is the result of two legal rulings about procedure. In November, 2010, five Supreme Court judges ruled unanimously that RBS was wrong in acting to repossess the homes of two brothers because the bank did not serve a legal warning the debt had to be repaid, known as a calling-up notice. With only one in five repossessions carried out with calling-up notices, thousands of repossession cases before Scottish courts became invalid. A ruling at Glasgow Sheriff Court last year that Northern Rock had moved to repossess too promptly, without providing a final chance to avoid court action, made thousands more repossession orders likely to fail because other banks were following a similar protocol. This should be helped by the pre-action requirements order, which came into force in Scotland in October 2010 under which lenders must make reasonable efforts to agree a repayment proposal and allow reasonable time to clear the arrears.
Both RBS and Northern Rock had to be rescued by the taxpayer but this tale of incompetence suggests the need for scrupulous attention to detail and fair treatment of customers has yet to be fully absorbed. The borrowers have failed to meet their payments but they cannot be held liable for bringing incompetent or defective legal actions. Mike Dailly of Govan Law Centre, the solicitor who is leading the campaign to recover the charges levied for failed actions, is entirely justified in condemning the lenders and criticising their solicitors as "unfair, immoral, and unethical" in double-charging Scottish consumers who are in financial difficulties.
The Council of Mortgage Lenders argues that, if the costs were not added to the mortgage accounts, all customers would effectively end up paying and many would regard this as unfair and inappropriate. That is true but it fails to recognise the only fair and appropriate way for the charge to be borne is by the institutions whose incompetence caused the actions to fail.