There is a reason why consumers in the UK don’t trust the banks and it is because, time and time again, banks have been guilty of putting their own greed before that which is fair and reasonable.
Fair and reasonable are words used by the Financial Conduct Authority (FCA), by the way. The word ‘Conduct’ is used by FCA in its Handbook, and in its manuals on Mortgages (Mortgage Conduct of Business Regulation) and Derivatives etc (Conduct of Business Sourcebook) for example. The guides/rules on how professional firms conduct themselves, also use phrases like Fair and Not Misleading.
But, sadly, banks can’t help themselves, in my experience. The latest is Bank of Scotland, part of Lloyds Banking Group that settled out of court last week with claimants who had brought a court case to it on one of its equity releases schemes.
Equity Release Schemes are regulated by the FCA. This particular scheme was what the bank called a Shared Appreciation Mortgage, and similar to ‘regular’ equity release schemes, it allowed homeowners to taken equity out of their homes (if aged 55 or older) to spend or use as they wanted. Equity release allows the homeowner to not pay for the money released; instead, the bank or lender gets its money back, with interest on top, if and when the borrower dies or goes into full time care.
Bank of Scotland’s Shared Appreciation Scheme gave it, in addition to getting the amount of the equity loan back in the event of death/long term care, to also help itself to a slice of any appreciation that the underlying house saw as well, up to 75%.
The group action versus Bank of Scotland was run on the basis of Unfair Relationships under the Consumer Credit Act of 1974 and last week Bank of Scotland made offers to settle with the claimants, rather than go to court. But, imagine the legal fees that arose during the claim process. The details of the deal that Bank of Scotland made with the claimants have been schussed up by way of Non-Disclosure Agreements, so it is unlikely that we will ever know the full extent of the settlement figures or methodology.
So, yet again an example of pure greed on the part of a bank. I have posted many times about the greed of banks, and their seeming inability to treat customers as what they are; their lifeblood, relationships that should be fostered, not corrupted. What the UK needs though is a strong regulator that applies the Rules and hands out penalties what banks transgress the Rules. The BBRS, set up to handle complaints brought by medium sized firms closed last week, and while to me it was no real loss to consumers, because it brought so few adjudications in its time, and cost the tax payer dearly, it was another blow to consumers, and surely a green light to the banks to carry on creating products that are neither Fair nor, Appropriate.