Equity-release plans cost West Brom £27m
West Bromwich Building Society last week finally admitted it has paid out nearly £27m in legal bills and compensation following its High Court battle with customers missold equity-release plans in 1980s and early 1990s.
The society has been left with the bill following inappropriate sales to pensioners by financial adviser Fisher Prew Smith. The economic turmoil in the late 1980s and early 1990s meant payouts from the Rainbow equity-release scheme became lower than the society's interest charges, lumbering clients with spiralling debts.
It is understood that investments in the scheme would have needed to return 23 per cent a year just to cover the society's mortgage costs.
West Brom resisted subsequent compensation claims, saying this was the adviser's responsibility until it was defeated in the High Court in 1998 in an action brought by almost 200 customers and supported by the Birmingham Post.
Mr Justice Evans-Lombe ruled that the society was liable for the misleading advice given to clients by Fisher Prew Smith and ordered it to pay compensation, which has averaged £13,000-£14,000 a client.
Last week, West Brom tried to draw a line under the matter, saying the years of legal wrangling combined with compensation payouts had cost a total of £26.76m, almost double its profits last year.
The society said 190 claimants had accepted its offer of compensation and hoped the remaining outstanding claims would be settled quickly.