Skipton Building Society Legal Action

by Mark Alexander

14:00 PM, 2nd April 2014
About 5 years ago

Skipton Building Society Legal Action

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Skipton Building Society Legal Action

In 2010 the Skipton Building Society broke a promise to over 60,000 mortgage account holders. 

The basis of that promise was that their mortgage rate would never exceed 3% over the Bank of England base rate – it did – CONSIDERABLY!Skipton Building Society Legal Action

The hike in monthly payments for a person with a £150,000 interest only mortgage has been around £181.25 per month!

Affected borrowers include both home-owners and buy to let landlords.

At the time a small group sought legal advice but insufficient funds were raised to challenge the matter in Court. Looking back at what happened I can only assume this was due to lack of marketing expertise within the campaign group which set out to challenge Skipton.

Given that the rate hike occurred over four years ago the Skipton probably think they have got away with this and are home and dry. Several borrowers have sold their properties or refinanced onto different deals but this makes no difference, they all have a potential claim for compensation.

Saqib Mahmood

Saqib Mahmood – affected borrower

Saqib Mahmood, a non-practising Barrister was affected by the rate hike to his personal mortgage and another on a buy to let deal. Mr Mahmood was part of the initial campaign group and admits “the campaign got nowhere due to lack of marketing expertise. The case we had was strong and Skipton have already capitulated for one borrower to avoid Court Action. I am delighted that Mark Alexander and his team at Property118.com have picked up the gauntlet on this one. I am also affected by the West Brom rate hike”.

Mr Mahmood was also keen to point out what he refers to as ‘the Gerald Ratner moment of the Skipton CEO’. This dates back to 5th March 2009 when the Bank of England base rate fell to 1%. At the time the Skipton chief executive David Cutter told FT Adviser “We have pledged our residential SVR will never be more than 3 per cent above base rate and, even with this at its lowest level for 315 years, we will honour our promise.” – LINK

The Legal Action Campaign Against Skipton Building Society

On the back of organising a successful campaign which raised over £450,000 to mount a legal challenge against the West Bromwich Mortgage Company (whose borrowers are affected by a similar issue) Property118.com has sought Counsels opinion on the conduct of Skipton Building Society. Counsel is so confident that he can get the Skipton’s decision reversed if the matter goes to Court that he is willing to work on a “no-win-no-fee” basis to achieve this. His objective will be to get the terms enforced and claim compensation backdated to the date of the increase. However, this will be subject to recruiting borrowers with a minimum combined total of 500 affected mortgage accounts.

NOTE – No-win-no-fee agreements are also known as a CFA (Conditional Fee Agreement) or a DBA (Damages Based Agreement).

The case will be run on similar terms to the legal action against West Bromwich Mortgage Company, i.e. one borrower will represent all those who instruct Counsel to challenge the legality of the rate hike. Any Court order will only apply to the mortgage accounts represented by the legal action. In other words, there will be no free rides.

There will be two representative legal challenges, one on behalf of consumers (i.e. homeowners and landlords with only one buy to let mortgage) and the other on behalf of landlords with two or more buy to let mortgages.

The Barrister we have engaged is Mark Smith of Cotswold Barristers. This is due to his experience in these matters having taken on the UK’s largest ever direct access barristers case against the West Bromwich Mortgage Company.

Costs and mitigation of risk

Cotswold Barristers will administer the action, Innovative Landlord Solutions LLP (the owners of Property118.com) will be responsible for driving the campaign and associated marketing.

We are not asking anybody to part with any money at this stage. However, to fund the campaign, at some point, we will need to begin fundraising to pay for administration and marketing. We will let you know more about this in due course.

Once an initial target of 500 instructions has been obtained, pre-action protocol proceedings will be initiated and papers will be served to the Courts 90 days thereafter. This 90 day period will be known as the Countdown period.

Mark Smith (Barrister-At-Law) will earn nothing unless he wins the case or arranges a settlement for the clients he is representing.

Skipton No Win No Fee

During the Countdown period Counsel will also organise ATE insurance or litigation funding to protect claimants against adverse costs in the event of the legal action failing and the others sides legal costs being ordered to be paid by the group. The case will not proceed if this risk cannot be mitigated, either by these routes or by self-insurance, a model that has worked with great success in the West Brom case.

Legal Action Objective

The objective of the legal action is for the 3% interest rate cap to be Court ordered and backdated to the commencement of the affected mortgages. In other words, those who sign up to this action could receive a lump sum refund (less costs) and lower mortgage payments moving forwards. If the barrister fails to achieve this objective he will be paid nothing for his efforts. If the case succeeds a percentage of the overpayment will be retained to pay ATE insurance, other expenses, and Counsels fee.

For more details please search Google for “Property118 Skipton Building Society Legal Action”

To register your interest please complete the form below.

Legal Action - Expression of interest form

You will not be committing to anything by completing this form but please only do so if you are an affected borrower, or were previously affected if your mortgage with Skipton building Society has been redeemed.

 



Comments

Mark Alexander

18:50 PM, 2nd April 2014
About 5 years ago

Phase one of this campaign is to inform as many people as possible by creating as much noise as possible. If you use Twitter please re-tweet this, whether this affect you personally or not. It could affect somebody you know and they will thank you for sharing this with them 🙂


.

Neil Patterson

18:54 PM, 2nd April 2014
About 5 years ago

This unilateral changing of the rules goes against the grain of every piece of training material I have ever read in my finance career.

Regardless of whether the Skipton thinks it can get away with it if no one forces the issue through a court I just can't believe it was even conceivable to anyone who works in the industry.

There are very strict rules in place about financial promotions being fair, not misleading and jargon free with all the relevant information and costs laid out.

Council of Mortgage Lenders code of practice on Treating Customers fairly.

I know BTL does not fall in past FSA regulation, but you have to produce a Key Features Illustration that details exactly how the product works matched with a Suitability Letter. And the List goes on.

It seems as incomprehensible as a vegan running a McDonalds, but we have seen that this could be just the start.

ian

19:47 PM, 2nd April 2014
About 5 years ago

Will the original legal team have the few that signed up on file ?

Mark Alexander

20:22 PM, 2nd April 2014
About 5 years ago

Reply to the comment left by "ian " at "02/04/2014 - 19:47":

Possibly and we intend to approach them in due course when the momentum gets going.
.

Onslow Clough

21:01 PM, 2nd April 2014
About 5 years ago

Reply to the comment left by "Mark Alexander" at "02/04/2014 - 20:22":

Watch out Skipton is what I say, If the campaign against The West Brom is anything to go by they won't know what's about to hit them. I'm just sorry I haven't got a Skipton Mortgage I fancy another fight.

chrisbusy

22:14 PM, 2nd April 2014
About 5 years ago

Agreed Onslow ... Almost wish i had a skipton mortgage to join in the fray also... It feels good to be able to fight back, as we have done with the West brom saga .
Good luck to you all as you now have a real voice with Mark and P118 ! !

Anne Nixon

22:18 PM, 2nd April 2014
About 5 years ago

My residential mortgage was with 'The Skipton' and the overnight hike in interest rate affected me enormously.
I remember thinking at the time "How can they do this? Changing the rules when a contract is already in place??."
Stupidly I thought they must know what they are doing, they wouldn't risk anything illegal would they? and I didn't contact them.
I will follow this with great interest!!

Mark Alexander

8:28 AM, 3rd April 2014
About 5 years ago

Reply to the comment left by "Anne Nixon" at "02/04/2014 - 22:18":

Hi Anne

Welcome to the party!

We are only powerful when we have a large group though. How might you be able to help us build that group?
.

Mark Alexander

10:14 AM, 3rd April 2014
About 5 years ago

“Exceptional conditions” was the term relied upon by Skipton.

The CEO of Skipton had his Gerald Ratner moment in 2009, a year before the rate hike – see http://www.ftadviser.com/2011/10/27/mortgages/mortgage-products/skipton-pledges-to-pass-on-any-base-rate-cut-in-full-GtplAIGssZNAuOH2c7fvNJ/article.html

Don’t you find it somewhat surprising that an ostensibly struggling lender, as Skipton claimed it was back in 2010, took over the loss making Chesham BS on 1 June 2010. Skipton announced it would be reneging on its rate pledge in January 2010 with the new rate taking effect on 1 March 2010. The Chesham acquisition took place just a year after it acquired another ailing society, the Scarborough, on 31 March 2009.

http://www.dailymail.co.uk/money/article-1254228/Pay-rise-Skipton-boss-Cutter-fuels-outrage-broken-pledge.html

The FCA were supposed to deal with this problem but failed consumers miserably.

The FCA were toothless tigers, hence they no longer exist. FCA are heading in the same direction hence so many MP's supporting EDM976 http://www.parliament.uk/edm/2013-14/976 from which I quote ...

"CONDUCT OF MORTGAGE LENDERS - That this House condemns mortgage lenders breaching tracker rate mortgage contracts by unilaterally increasing the margin they charge over the Bank of England base rate in order to increase their profit margins and deliberately targeting borrowers where consumer protection law is ambiguous; and calls on the Government to investigate the alleged associated recent activities of the Bank of Ireland and West Bromwich Building Society."

All will come out in Court
.

The Man From Nowhere

11:31 AM, 3rd April 2014
About 5 years ago

Reply to the comment left by "Mark Alexander" at "03/04/2014 - 10:14":

Below is an extract from evidence presented to Parliament by Which? regarding variable rate mortgages. It shows increases applied to SVRs by Lenders including Skipton in 2010. As you can see, Skipton and Amber Homeloans (owned by Skipton) have the largest percentage increase in their SVRs.

The full Which? report can be found using the below hyperlink.

http://www.parliament.the-stationery-office.co.uk/pa/cm200910/cmselect/cmtreasy/478/47816.htm

Written evidence by Which?

SPREAD—VARIABLE MORTGAGE RATES OVER BANK OF ENGLAND BASE RATES

In addition to the increasing spreads on individual products, the industry as a whole is increasing its margins as consumers leave favourable short-term deals agreed prior to the start of the credit crunch and move onto Standard Variable Rates. For example, at the 2009 RBS annual results, Brian Hartzer, responsible for UK retail, said "... we've certainly have seen a shift to SVR which is helping our margin and will help our revenue growth in the year ahead as well, because the margins are healthier on SVR".

The Bank of England recently estimated that if spreads remain at their elevated levels then a Bank of England base rate of just 3% would leave the proportion of income accounted for by interest payments back where it was at the start of the credit crunch. To put these figures into context an amount equal to around 2.6% of income would be around £25 billion each year.

Table 1

INCOME GEARING UNDER DIFFERENT INTEREST RATES (%)

Spreads

Bank rate (%)

0.5
2
3
4
5
6

2009 Q2

7.7
9.1
10.6
12.1
13.6
15.1

1999-2003 average

4.2
6.5
8.0
9.5
11.0
12.5

Source: Bank of England, Financial Stability Report, December 2009 page 26

Standard Variable Rates

Several lenders have begun to increase the Standard Variable Rates for existing borrowers. The highest of these increases has been undertaken by Skipton Building society, which increased its SVR from 3.5% to 4.95% with effect from 1 March 2010. This could increase the average cost of a £150,000 mortgage by over £1,450 a year. Skipton had previously given its borrowers a contractual commitment that the SVR would be no more than 3% above base rate. They are now relying on a term allowing them to remove the SVR ceiling under "exceptional circumstances". These changes illustrate the complete lack of contractual protection for many consumers on their lender's Standard Variable Rates. This could pose particular problems for customers of Northern Rock when it is returned to the private sector. Many customers will be unable to move elsewhere due to low levels of equity or previous repayment difficulty.

Table 2

INCREASES IN STANDARD VARIABLE RATES

Accord mortgages
SVR increase +0.65%
New SVR 5.99%
Dated Changed - 23 December 2009

Amber Home Loans
SVR increase +1.45%
New SVR 4.95%
Date changed - 1 March 2010

Hanley Economic Building Society
SVR increase +0.45%
New SVR 5.19%
Date changed - 1 March 2010

Mansfield
SVR increase +0.35%
New SVR 5.59%
Date changed - 5 January 2010

Norwich & Peterborough
SVR increase +0.50%
New SVR 5.35%
Date changed - 2 February 2010

Skipton BS
SVR increase +1.45%
New SVR 4.95%
Date changed - 1 March 2010

UCB Home Loans
SVR increase +0.30% to +0.50%
New SVR 5.09% to 5.49%
Date changed - 1 February 2010

Source: Defaqto

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