The Co-operative Bank must pay redress to mortgage customers, says group of MPs

The MPs made the comment after the High Court dismissed the Co-operative Bank’s attempts to prevent the Financial Ombudsman Service from looking into the fairness of the interest rate increases imposed on customers of Mortgage Agency Services No.5 (MAS5)..

Seema Malhotra MP, Co-Chair of the All Party Parliamentary Group (APPG) on Mortgage Prisoners said "Now that the Co-operative Bank has lost its Judicial Review, it must start living up to its ethical values and pay redress to the customers who have overpaid...The Financial Ombudsman's investigator concluded that the SVR (standard variable rate) 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. The FCA (Financial Conduct Authority) and the FOS (Financial Ombudsman Service) 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."

The APPG on Mortgage Prisoners said it is calling on the Co-operative Bank to stop dragging out these cases and pay redress to the customers who have overpaid due to these "unfair interest rate increases".

MAS5 increased the SVR four times over the period 2009 to 2012, according to the MPs. It claimed that each of these rises was necessary to reflect changes in the cost of funding.

A Co-operative Bank spokesman said: “MAS5’s claim for judicial review was not about the underlying complaint itself but a challenge to the FOS’s jurisdiction and to the interpretation of the time-barring rules set out in the Financial Conduct Authority Dispute Resolution handbook.

"The decision impacts the general principle of how time-barring is construed by the FOS and applied to complaints more generally and within the wider industry. It is disappointing that MAS5’s application for judicial review has been dismissed.

“The bank will now continue to work with the FOS as it reviews the merits of the underlying complaint, and the bank maintains that historical variations made to the customer’s mortgage account were applied fairly and in accordance with the terms and conditions of the mortgage contract.

"In a Financial Ombudsman case from 2014 we received a decision in which the FOS concluded that it was satisfied that we had not acted unfairly and that historical increases to the MAS5 SVR had been applied in accordance with the mortgage terms and conditions.”