Vulnerable mortgage customers are facing 'devastating increases' in standard variable rates, MPs warn

The All-Party Parliamentary Group (APPG) on Mortgage Prisoners has written to the Co-operative Bank, the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) demanding action for Mortgage Agency Services No.5 (MAS5) mortgage customers who they claim have been hit by unjust increases in interest rates.

The APPG said evidence uncovered by the MPs and the FOS suggests that MAS5 treated customers unfairly and that the increases to the MAS5 SVR were not in line with the terms and conditions of the mortgage.

Mortgage Agency Services No. 5 Ltd is a subsidiary of the Co-operative Banking group.

The FOS investigator found that MAS5 had treated a customer unfairly when it increased their Standard Variable Rate (SVR) from 2.99% to 5.75% over the period from 2009 to 2012, the APPG said.

In a statement, the APPG said: “MAS5 increased the SVR four times over the period from 2009 to 2012. It claims that each of these rises was necessary to reflect changes in the cost of funding.

“In relation to the 2009 increases the FOS investigator found that MAS5 “had not provided any evidence to show that the costs of funds it used in its business increased”.

The APPG statement added: “In relation to the 2011 and 2012 SVR increases (MAS5] hasn’t provided anything that relates specifically to MAS5’s own costs, or how these might have changed.”

The MPs said they have also received “very disturbing reports about how MAS5 and the Co-operative Bank have been treating vulnerable customers and these have been passed to the FCA for investigation”.

Seema Malhotra MP, Co-Chair of the APPG on Mortgage Prisoners said “The Financial Ombudsman’s investigator concluded that the SVR increases by Mortgage Agency Services No.5 (MAS5) Ltd were unfair and not in line with the terms and conditions of the mortgage. These unfair increases have had a devastating impact on customers.”

“We hope that the Co-operative Bank will start living up to its ethical values and pay redress to the customers who have overpaid due to the misconduct.

“The FCA and the FOS need to intervene to protect these customers and stop MAS5 from dragging out these cases and causing more misery to vulnerable people.

“Many of these customers have serious health issues or financial problems.”

In its letter to Nausicaa Delfas, Chief Executive of the Financial Ombudsman Service, the APPG said: “We are also concerned that the FOS allows firms to put pressure on customers to sign confidentiality agreements which prohibit these customers from sharing their concerns with the FCA.

“We are especially concerned that when businesses receive a FOS decision which they do not want to apply in other cases they put pressure on customers to withdraw their complaint, accept an agreement and sign a confidentiality clause.

“The FOS seems to allow this to happen and to not question it, whilst also allowing MAS5 to delay and drag out these complaints for as long as possible.”

“In our view, this demands a strong and proactive response from the FOS to prevent further detriment to MAS5 customers."

A spokesman for the FOS declined to comment in response to the APPG’s letter.

A spokesman for the Co-operative Bank said: “Today we received a letter from the APPG on Mortgage Prisoners and we intend to review this and respond in due course to the APPG on the matters they have raised.”

An FCA spokesman said: "We’ve received the letter and will respond."