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High Court rules Bank of Scotland unfairly charged mortgage borrowers

Bank of Scotland unfairly double billed mortgage customers who fell into arrears, a High Court judge in Belfast has ruled.

The BBC reports the case, which centred on the way the bank added arrears to original mortgage borrowing, could have implications for thousands of Bank of Scotland borrowers across the UK.

Lloyds Banking Group says it plans to appeal the decision. 

The judge ruled the bank’s behaviour had been “unconscionable” and had caused borrowers to be “plunged into depression”.

Master Ellison ruled once arrears had been added to the loan, known as capitalisation, the mortgage should no longer be considered in arrears.

But the bank continued to treat such mortgages as in arrears and used that as the basis for bringing legal cases.

Ellison said this meant borrowers were being threatened with repossession based on an “erroneous and fictional arrears balance”.

He said borrowers faced increased monthly payments to reflect the capitalised arrears, as well as a demand for the immediate payment of the arrears.

He said this meant many court decisions concerning suspended repossession orders had been made on “erroneous assumptions”.

Ellison said he was imposing a series of strict conditions on the bank if it tried to enforce any suspended repossession orders.

The judgment concerned three separate cases brought with the support of the Housing Rights Service.

HRS solicitor Christopher McGrath says: “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’.

“It is our view that this practice unfettered would undoubtedly have resulted in many borrowers unnecessarily losing their home.”

A Lloyds Banking Group spokeswoman says: “We are continuing to consider the High Court judgment and our position to various points. However, we have already identified a number of areas within the judgment that we do not consider to be representative of the way we manage the mortgages of customers who have entered arrears and as a result we will appeal the judgment on at least these grounds.

“Repossession is always the last resort. We work hard to ensure that we are providing customers facing financial difficulty with the right support to help ease their circumstances and ultimately help to resolve the situation in what we appreciate is an extremely sensitive time.”

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