The relevant law
In Scotland, a lender is entitled to charge a mortgage customer for all expenses reasonably incurred in the calling up and enforcement of a mortgage from a standard provision in the Conveyancing and Fedual Reform (Scotland) Act 1970:
Standard condition 12, schedule 3, 1970 Act –
“The debtor shall be personally liable to the creditor for the whole expenses of the preparation and execution of the standard security and any variation, restriction and discharge thereof and, where any of those deeds are recorded, the recording thereof, and all expenses reasonably incurred by the creditor in calling-up the security and realising or attempting to realise the security subjects, or any part thereof, and exercising any other powers conferred upon him by the security”.
Can legal expenses incurred where a lender has raised incompetent proceedings, or deserts those proceedings to re-raise again, be ‘reasonably incurred’? We don't believe so, and we think passing on these repeat costs to Scottish consumers is clearly unfair in relation to the Financial Services Authority's (FSA) Principles of Business.
Consumers can rely on the FSA's Principles for a Financial Ombudsman Service (FOS) complaint, but cannot found upon the Principles for a personal damages action: British Bankers Association v. FSA and FOS [2011] EWHC 999 (Admin). The key principle relevant here is as follows:
Principle 6 (Treating Customers Fairly)
“6. Customers' interests - A firm must pay due regard to the interests of its customers and treat them fairly”.
Standard condition 12, schedule 3, 1970 Act –
“The debtor shall be personally liable to the creditor for the whole expenses of the preparation and execution of the standard security and any variation, restriction and discharge thereof and, where any of those deeds are recorded, the recording thereof, and all expenses reasonably incurred by the creditor in calling-up the security and realising or attempting to realise the security subjects, or any part thereof, and exercising any other powers conferred upon him by the security”.
Can legal expenses incurred where a lender has raised incompetent proceedings, or deserts those proceedings to re-raise again, be ‘reasonably incurred’? We don't believe so, and we think passing on these repeat costs to Scottish consumers is clearly unfair in relation to the Financial Services Authority's (FSA) Principles of Business.
Consumers can rely on the FSA's Principles for a Financial Ombudsman Service (FOS) complaint, but cannot found upon the Principles for a personal damages action: British Bankers Association v. FSA and FOS [2011] EWHC 999 (Admin). The key principle relevant here is as follows:
Principle 6 (Treating Customers Fairly)
“6. Customers' interests - A firm must pay due regard to the interests of its customers and treat them fairly”.