TSB faces £800m lawsuit from so-called mortgage prisoners

TSB is facing a £800m foreclosure lawsuit by former Northern Rock borrowers subject to “excessively high” rates

  • Bank faces £800m class litigation claim from former Northern Rock clients
  • Around 200 have joined the claim so far, but the law firm says 27,000 could eventually do so.
  • They each claim around £50,000 in what they say is overpaid interest.
  • TSB bought government loans and manages them under the Whistletree arm
  • The bank says it will ‘vigorously defend its position’

TSB is facing a £800m lawsuit from so-called mortgage prisoners.

Six years ago today, the lender acquired 27,000 mortgages worth £3.3bn that had originally been made by Northern Rock.

It bought those mortgages from the government, which had been servicing them since Northern Rock collapsed in the early days of the 2008 financial crisis.

Captive?: Six years ago, TSB bought 27,000 mortgages worth £3.3bn that had originally been made by Northern Rock.

But under TSB’s Whistletree brand, former Northern Rock borrowers say they have been forced into mortgages with “excessively high” interest rates.

Harcus Parker, the law firm that is filing a lawsuit on behalf of the foreclosure inmates, filed papers with the High Court today seeking to create a class action order.

It revealed that 200 homeowners have joined the case, each claiming around £50,000 in overpaid interest. But he believes as many as 27,000 people could ultimately join the litigation.

Harcus Parker claims that since TSB bought the loans, it has charged its Whistletree clients nearly double the fees charged to its other clients.

It also says that, until recently, TSB refused to allow them access to TSB’s “regular” fixed rate offers on the same terms as its other customers.

Matthew Patching, Senior Associate at Harcus Parker, said: ‘TSB has treated our clients terribly, charging them interest on their mortgages at significantly higher rates than other similar clients at the same bank.

“This has had a real and devastating impact on the lives of homeowners who, in addition to obtaining a mortgage with Northern Rock prior to the global financial crisis, are often identical to a large number of other TSB clients.”

TSB said it “will vigorously defend its position.”

He says that since buying the mortgages in 2016, he has allowed clients to transfer to cheaper products where they couldn’t before.

Harcus Parker claims Whistletree customers have been charged nearly double the fees of other TSB customers, but the bank says it has allowed them to transfer to cheaper products.

Harcus Parker claims Whistletree customers have been charged nearly double the fees of other TSB customers, but the bank says it has allowed them to transfer to cheaper products.

Who can join the lawsuit?

Anyone whose mortgage has been serviced by Whistletree is eligible to join the claim.

The firm will ask the Superior Court to enter a class action order at a hearing in the fall. This would make it possible for anyone who has ever had a Whistletree serviced mortgage to seek compensation.

Customers who took out a “joint mortgage,” which allowed borrowers to access loans of up to 125 percent of the value of their homes, can apply for additional compensation, according to Harcus Parker.

Patching added: ‘The Together Mortgage was a particularly toxic product. It seemed to allow borrowers to get an unsecured loan, along with a mortgage, at a reasonable interest rate, but there was a catch.

“Should the mortgage ever be paid off, or if the borrower switched to another lender, the interest charged on the linked loan of up to £30,000 would increase by up to eight per cent.”

“I was living on 13 pounds a week”

Margaret Lea, 73, from Bexhill, East Sussex, found herself struggling to keep up with the payments on her two-bedroom flat after interest rates on her Together mortgage increased.

The retired former charity chief executive and grandmother of two said: ‘When I took out the mortgage in 2006, it was very manageable. But in 2009 I was fired and soon Northern Rock collapsed.

‘My monthly payments started to spiral up. It went from £486 to £631 per month. That’s when I really started to struggle.

He was desperate to keep the house. My health was not very good, I have asthma and COPD, so being homeless would be a death sentence.

‘After making the monthly payments, I was living on £13 a week to cover food and bills. She wasn’t turning on the heat; She was cold and hungry.

“I had some very dark moments, I felt suicidal at one point. If it hadn’t been for my daughter’s support, I’m terrified to think what would have happened. She has helped me financially to get through this.

“It makes me sick to think about how the bank has treated me and many other vulnerable people.

“Years of enjoyment were robbed from me, my self-esteem was destroyed, all just to squeeze a little more money out of me.”

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