In 2013 West Bromwich Mortgage Company increased the rate of interest on some mortgages which had been described as being index linked to the BoE base rate. The base rate itself had not changed but West Brom relied on small print in the terms and conditions and increased the rates.
Many of these cases went to FOS and adjudicators thought the increase was valid. Complainants asked for ombudsmen to rule and the ombudsmen agreed with the adjudicators, as usually happens at FOS. FOS said it was fair and reasonable for mortgages linked to the base rate to be increased even though the base rate stayed the same.
But some mortgage holders took their cases to court. The action was collated by Mark Alexander via property118.com. The original judge found West Brom was correct, but on appeal this was reversed by three very senior judges and West Brom is to repay £27.5million which will put the company into loss this year.
Skipton Building Society and Bank of Ireland have been mentioned as having similar issues to address, what will happen if there is an issue and their mortgage holders go to FOS ? Which way will FOS rule now ? What happens to West Brom holders who now have a higher rate as a result of actually accepting the FOS decision (if there are any) ?
Where does this leave FOS ?
FOS does not decided cases according to the law, but by what the person looking at the case thinks is “fair and reasonable”. FOS does not admit to making mistakes and in any case their remit is so wide that proving a mistake is almost impossible. FOS has no appeals process against ombudsman’s decisions. ( “The ombudsman’s decision is final”)Because of this their decisions are rarely examined any mistakes just pass un-noticed and the organisation feels it always gets it right. But now the appeal court has shown that in a hugely important case which actually affects around 6000 borrowers and £27.5 million, it looks as though FOS got it wrong. Not just one FOS employee but many adjudicators and ombudsmen. Surely now FOS has to accept that it cannot always be right all of the time and introduce some process for cases to be appealed independently.
What will happen now to help FOS get it right ? Nothing much ! The ombudsman’s decision is final. FOS is a law unto itself. What is really needed is an appeals process for serious cases at the very least. Perhaps there is a tiny chink of light ?
The story in This Is Money
The story in The Guardian
West Brom’s statement
The story on property118.com website
Typical West Brom decision by FOS
The actual court judgement 8 June 2016
“Is the FOS fit for purpose” ?
One thing to learn from this saga is…never give in when dealing with financial institutions or FOS…keep trying !