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Bank of Scotland held to account over bad practice with with customers' mortgage arrears

Bank of Scotland held to account over bad practice with customers’ mortgage arrears.

A group of Bank of Scotland mortgage holders have won their High Court Case in Belfast over a problem relating to how the lender was dealing with their mortgage arrears. All three customers were facing possession action at the time and were represented by Northern Ireland advice charity, Housing Rights Service.

At the hearing Housing Rights Service challenged the bank’s practices which it considered to be unfair. In these cases, the Bank of Scotland had capitalised the customers’ mortgage arrears by adding the arrears amount to the outstanding mortgage balance, without the customers’ consent. This resulted in an increased mortgage instalment - so effectively the customers were paying off their arrears but were not aware of this. The bank then proceeded with legal action to repossess the properties and asked the customers to make additional payments towards the arrears to avoid losing their home. Housing Rights Service considered this to be double charging. 

Housing Rights Service uncovered the issue when a number of customers contacted their Mortgage Debt Advice Service.  Advisers noticed a pattern of unexplained increases in Bank of Scotland customers’ mortgage payments despite there being no rise in the bank’s interest rates.

Christopher McGrath, Solicitor with Housing Rights Service commented:

“The Court has found that Bank of Scotland were adopting a practice of double billing and non-consensual capitalisation which was in conflict with the requirements of the Financial Conduct Authority. This practice was unfair as it evidently prevented borrowers from making payment proposals to the court to repay their arrears.  Clarity and transparency are essential during possession proceedings, otherwise very real problems can be created for borrowers, their advisers and the court. However the court has stated that the handling of accounts by Bank of Scotland in these instances, created “a mist of incomprehension, confusion and self -contradiction.”

The law provides protection to borrowers in that it allows the court discretion to stop possession action when a borrower can put forward a payment arrangement. However the actions of Bank of Scotland distorted this discretion. It is our view that this practice unfettered would undoubtedly have resulted in many borrowers unnecessarily losing their home.”

The findings could have implications for thousands of Bank of Scotland mortgage holders across the UK. The case could be subject to appeal.

The mortgage holders were successfully represented by Housing Rights Service at the High Court in the case which was funded by the Public Interest Litigation Support Project (PILS).





Notes to editors:

For further information contact Claire Moss at Housing Rights Service on 028 90267925


Spokespersons will be available for comment


  • Established in 1964 Housing Rights Service (HRS) is the leading specialist provider of independent housing advice in Northern Ireland.  The charity works to improve lives by tackling homelessness and housing problems.
  • Housing Rights Service operates the Mortgage Debt Advice Service on behalf of the Department of Social Development who funds the project.
  • A substantive article on the Judgement is available at www.housingrights.org.uk
  • The PILS Project (Public Interest Litigation Support Project) was established in 2009 to advance human rights and equality in Northern Ireland through the use of and support for public interest litigation. The PILS Project has established itself as a leader in developing public interest litigation in Northern Ireland.
  • In 2013/2014 HRS provided advice and assistance on over 40,000 housing issues.