TSB is facing an £800m lawsuit from so-called mortgage prisoners.
Six years ago today the lender snapped up 27,000 mortgages worth £3.3billion which had originally been handed out by Northern Rock.
It bought those mortgages from the Government, which had been managing them since Northern Rock collapsed in the early days of the 2008 financial crisis.
Held captive?: Six years ago TSB snapped up 27,000 mortgages worth £3.3billion which had originally been handed out by Northern Rock
But under TSB’s Whistletree brand, the former Northern Rock borrowers claim they have been locked into mortgages with ‘excessively high’ interest rates.
Harcus Parker, the law firm which is bringing a lawsuit on behalf of the mortgage prisoners, has today lodged documents with the High Court with the aim of creating a group litigation order.
It revealed that 200 homeowners have joined the case – with each claiming around £50,000 in overpaid interest. But it thinks up to 27,000 people could ultimately join the litigation.
Harcus Parker claims that since TSB bought the loans, it has charged its Whistletree customers almost double the rates charged to its other customers.
It also says that, until recently, it TSB refused to allow them to access ‘ordinary’ TSB fixed-rate deals on the same basis as its other customers.
Matthew Patching, senior associate at Harcus Parker, said: ‘Our clients have been treated terribly by TSB: they have been charged interest on their mortgages at rates significantly higher than those charged to other similar customers at the same bank.
‘This has had a real and devastating impact of the lives of homeowners who, other than happening to take out a mortgage with Northern Rock prior to the global financial crisis, are often identical to large numbers of TSB’s other customers.’
TSB said it will ‘robustly defend its position’.
It claims that since it bought the mortgages in 2016, it has allowed customers to transfer to cheaper products where they previously could not.
Harcus Parker claims Whistletree customers have been charged almost double the rates of TSB’s other customers – but the bank says it has enabled them to transfer to cheaper products
Who can join the claim?
Anybody whose mortgage has been administered by Whistletree is eligible to join the claim.
The firm will ask the High Court to make a Group Litigation Order at a hearing in Autumn. This would make it possible for anybody who has ever had a mortgage administered by Whistletree to seek compensation.
Customers who took out a ‘Together Mortgage’, which allowed borrowers to access lending of up to 125 per cent of the value of their homes, may be able to seek additional compensation, according to Harcus Parker.
Patching added: ‘The Together Mortgage was a particularly toxic product. It appeared to allow borrowers to take out an unsecured loan, alongside a mortgage, at a reasonable rate of interest, but there was a catch.
‘If the mortgage was ever paid off, or if the borrower switched to another lender, interest charged on the linked loan of up to £30,000 would jump by up to eight per cent.’