Halifax mortgage customers in line for £500 million payout

February 24th, 2011

As part of the deal with the Financial Services Authority (FSA), the Halifax has to pay £500 million to about 300,000 mortgage customers after it admitted confusing them about its right to charge them more for their standard variable rate mortgages.

The bank, now part of Lloyds Banking Group, raised the margin on some of its mortgages from 2% to 3% above base rate in January 2009. Lloyds claimed that the agreement was a “voluntary” and “proactive” one.

Halifax said that some customers would receive a flat-rate payment of £250. Others will receive a variable payment, related to the rise in their interest payment and the size of their mortgages. This could range from hundreds of pounds to several thousand pounds.

The problem arose in the autumn of 2008 and early 2009 as the Bank of England progressively cut its official bank rate from 5% to 0.5% to help stave off the effects of the banking crisis.

The Halifax decided not to cut its standard variable rate (SVR) in step with the Bank of England, thus increasing its margin above base rate. They then admitted that their mortgage offers issued between September 2004 and September 2007 had not been as clear as they could have been and had the “potential to cause confusion”.

The lender had not made it clear that its terms and conditions meant it could later vary the charge for customers who went onto its standard variable rate.

The problem was first highlighted at the time by Ray Boulger of mortgage brokers John Charcol. He had queried whether or not the Halifax had the right to change its SVR from a 2% margin over base rate to a 3% margin if the offer documentation, stating the key facts of the deal, had not explicitly mentioned the bank’s right to do so.

Typically the affected customers were those whose mortgage deals reverted to the Halifax SVR once their fixed-term or tracker rate deal had expired. The Halifax raised the ceiling on its SVR from bank rate plus 2% to bank rate plus 3% with effect from January 2009, citing “extenuating economic conditions”.

This meant that some 300,000 customers at this point were charged more than would otherwise have been the case.

A spokesman for Lloyds said, “The group is committed to running its business with the highest levels of integrity and treating its customers fairly, and therefore believes that a proactive co-ordinated programme to identify affected customers and make goodwill payments is the appropriate course of action”.

About 600,000 customers will be contacted by the Halifax, however, about 300,000 customers will not receive a payment as they were not paying the SVR on their mortgage during the period affected.

Those who were affected and who are still with the Halifax will have their mortgage accounts credited in April this year. If they have left the Halifax they will be traced and offered a cheque.

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UK Banks still failing on customer service

February 19th, 2011

Research that will surprise no one has revealed this week that after all the publicity and consumer campaigns against them, banks are still failing to deal with customer complaints in a satisfactory manner.

The watchdog Consumer Focus commissioned the research which took the form of a nationally representative sample of 2,000 people. This was conducted by phone during December and January.

The headline figures show that 75% of customers who are unhappy with the service at their bank will make a complaint, only 47% of them are then satisfied with the bank’s response.

There are several concerning aspects to this information, the first being that 25% of people who are unhappy with the customer service at their bank don’t even bother to complain. As the great Anne Robinson used to say, ‘don’t let them get away with it, stand up for yourself and make a fuss’. Otherwise nothing will change.

Of the 47% unhappy with the bank’s response, 31% fail to do anything about it and take the complaint further. Only 9% end up taking it as far as the Financial Ombudsman Service.

Some of these figures will represent cases where the complainant is in the wrong, but not many. And it demonstrates only too well how banks try and succeed to get away with shoddy customer service.

This new research comes after the City watchdog, the Financial Services Authority, described banks complaints procedures as “poor” last year.

An expert at Consumer Focus summed up the situation saying: “Customers are willing and able to fight their corner and take the first step of complaining. The problem is they then seem to become disheartened by the banks’ poor service and complaints systems. Unfortunately, persistence appears to be the key to getting the answer you would like from your bank.”

Consumer Focus now joins the ranks of many analysts calling for banks to take complaints more seriously and devote more resources to improving customer service. Consumer rights groups are also urging the Financial Services Authority (FSA) to continue using the prospect of financial sanctions to keep the pressure on poorly performing firms.

The progress in this area is painfully slow, especially for those experiencing poor quality customer service on an almost daily basis. But it is important to note that progress is being made and gradually, oh so gradually, the banks are being made to take customer complaints more seriously and act on them.

As a final note, if you are disappointed with the standards of customer service at your bank, don’t just accept it but get on the internet, shop around and switch your account. You do have the ultimate sanction.

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Debt service to continue after Government changes their mind

February 12th, 2011

Following last week’s story about the Government’s plans to stop the funding for hundreds of specialist debt advisers, it seems they may have changed their minds after £27 million has been ‘found’.

For the past five years, the £27m-a-year Financial Inclusion Fund has been paying for about 500 specialists in England and Wales to give free advice. Last month, the government said it would axe the fund, and advisers stopped taking new cases.

Funding for the advisers, who help 100,000 people with complex cases every year, was expected to run out in March.

The decision not to renew the fund led some to express fears that a gap could appear in the provision of help to sick or vulnerable people who become trapped in serious debt.

Although there is still free advice available from several bodies, including Citizens Advice, these specialist advisers are trained to deal with complex cases and to represent clients to their lenders.

The debt advisers, who work out of Citizens Advice offices and community halls around England and Wales, had already been sent redundancy letters and been told to stop taking on any new clients, other than those with the simplest problems.

Now, the Department for Business has said it has found the money from a contingency fund to keep the advice going for another year. However, the Business Secretary Vince Cable said that, after the next year, the government would then be looking elsewhere for help in funding advice services, such as the debt advisers.

While the government has maintained funding for the programme, it provides only a small part of the revenue necessary to keep Citizens Advice afloat. This is an opportunity for the other funding streams, such as from local authorities, to help provide whatever support they can to keep this service going in the long term.

The Consumer Credit Counselling Service (CCCS) welcomed the reprieve amid “current uncertainties over the availability of face-to-face debt advice”. This should put free advice in a place where it can continue to take on the fee-charging sector which the recent Office of Fair Trading review found to be unfit for purpose.

The challenge now is for debt charities to work together with local authorities to provide free debt advice, face to face, over the phone and online, for those who need it.

The next few years are likely to be very difficult for many people due to stagnating household budgets and rising costs but given CCCS’s capacity on its helpline and online debt counselling, there is no need for anyone to pay for debt advice.

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