CUSTOMERS with a high street bank are set to receive compensation worth up to £10,000s after being overcharged mortgage interest.
The Financial Ombudsman Service (FOS) has ruled that the Co-op Bank applied “unfair” interest rate increases to its standard variable rate (SVR) deals on four occasions between 2009 and 2013.
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The hikes, made by Mortgage Agency Services No.5 (MAS5), part of Co-op Bank, impacted so-called mortgage prisoners, who were tied into deals and unable to switch after the 2008 financial crash.
The all-party parliamentary group (APPG) for mortgage prisoners claim it led to people stuck on the home loans suffering mental health issues and some even losing their homes as they fell into arrears.
MAS5 said its SVR rates rose due to additional costs, but the FOS found no evidence this was the case.
The Sun understands around 80 customers have already complained they were unfairly treated and overcharged on their mortgage rates.
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Dominic Lindley, secretary to the mortgage prisoners APPG, said more could be in line for a payout.
He added: “We’re talking hundreds, if not several thousand, who could complain.”
The APPG said payments for those impacted could reach the tens of thousands.
For example, a customer with an interest-only mortgage of £100,000 would receive around £20,000 in redress if they received the full 2.76% of the unfair SVR increases for the past six years, it said.
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Meanwhile, David Hollingworth, associate director of L&C Mortgages, added: “Mortgage prisoners have had a tough time as the tightening in criteria after the financial crisis made it harder to switch away from their existing lender.
“That left those with lenders that stopped offering mortgages stuck on higher rates and, in this case, that was compounded by the rate hikes that were applied.
“The ruling will offer a boost to those affected and it will now be for Co-operative Bank to consider how it will settle this matter.”
A spokesperson for Co-op Bank said it believed it was making interest rate hikes “in accordance with the terms and conditions of the mortgage contracts”.
They did not confirm how many customers had been impacted by the rate rises.
They added: “The Bank is now working through the details of the final FOS decision and will endeavour to progress this as quickly as possible to determine next steps.
“We remain committed to providing our customers with the support and appropriate forbearance measures they need based on their individual circumstances.”
Dominic said anyone who was a MAS5 customer and overcharged should complain to the Co-op Bank as soon as possible.
This is because the FOS is only allowing the majority of customers to receive refunds for any increases going back six years after making a complaint.
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You can make a complaint through Co-op Bank’s customer service helpline on 01752 236 550.
The helpline is open between 8.30am and 5.30pm Monday to Friday.
You can also join our new Sun Money Facebook group to share stories and tips and engage with the consumer team and other group members.
