West Bromwich Building Society Tracker Margins Legal Action

Good article

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10337264/Victims-of-tracker-rises-begin-fight-back.html

I like the bit about

Ms Piggott, who has three buy-to-let properties but only one with West Brom, said she would look into whether the lender breached any data protection rules when determining which customers had multiple buy-to-let properties in their portfolio.
She said: "A credit reference is not for deciding whether I'm a member of a category of people they think they can increase mortgage rates for. If I even suspect that they have broken the data protection rules, I'll be making an Information Commissioner complaint as well as an FCA complaint, and the complaint may well include the credit reference agency, depending on the circumstances."

Thousands of landlord borrowers with West Bromwich Building Society are planning to fight a move by the lender to raise their so-called "tracker" mortgage rates by two percentage points. For some borrowers this will mean their rates will more than double.
West Brom is the second lender to increase tracker mortgage rates, sparking controversy over whether the loans should ever have been termed "trackers" in the first instance. Earlier this year the Bank of Ireland made similar changes for tracker customers, which has stoked fears that other lenders may follow suit in an attempt to increase their margins.
Tracker mortgages have been sold on the understanding their rate simply tracks the Bank of England's Bank Rate. West Bromwich's website this week still described a tracker mortgage as a product that "gives you the certainty of knowing that the rate you pay will move in line with Bank base rates".
At the moment the loans track the Bank of England's Bank Rate, currently 0.5pc, plus a margin. This margin varies and is set at the time the mortgage is taken out. That margin usually does not change during the term of the loan.
It is widely known that many lenders are losing vast sums on their tracker deals because they set their margins too low before the financial crisis, during which interest rates plummeted. Many are now carefully going through their small print to see if they can increase their margins, which is easier to do for buy-to-let investors as they are not protected by the same consumer protection regulations as residential buyers.This week, West Brom announced that 6,700 borrowers would see their rate rise by two percentage points in December, which will significantly increase these property investors' repayments.
The change will affect landlords with multiple properties who took out at least one mortgage through West Brom's now defunct lending arm West Bromwich Mortgage Company.
Many readers have contacted The Daily Telegraph to express their anger at the decision. They say their payments will rise by hundreds of pounds a month when the change comes into effect.
Sarah Piggott, who was formerly a lawyer for housing charity Shelter and is a West Bromwich buy-to-let tracker customer, will see her mortgage payments rise by £250 a month from December. She said she was going to fight West Brom on the rate rise.
She argued that the building society's "key facts" documentation, issued to her in 2009 when she switched from a fixed rate to a tracker mortgage, did not state that the lender had the ability to increase rates even if the Bank of England's Bank Rate did not rise. She said it should not have the ability to bury such fundamental information in its terms and conditions. A spokesman for West Bromwich said the building society had received independent legal advice that it was acting within the terms of its contracts.
He said the full terms and conditions, which were issued to borrowers alongside their mortgage offer, allowed the building society to vary borrowers' interest rates. In particular, the rate might be varied to reflect market conditions generally and to make sure business was carried out "prudently, efficiently and competitively".
But Ms Piggott said it was likely that West Brom was advised that it could only raise rates for "sophisticated" investors.
She said: "I suspect West Brom received legal advice that advised them they can only hike rates for the more sophisticated investors; hence their letter says the hike only applies to landlords with more than one property.
"I'm not a sophisticated buy-to-let investor – just someone who has moved house more than once and chosen to rent the house I'm leaving rather than sell it, and I don't think their discriminatory rule should apply to me. I'm more of a multiple landlord by accident, and it's certainly not my business in any sense of the word."
The West Brom spokesman said the building society was only applying the rate change to borrowers with multiple properties because it classified them as professional landlords.
It obtained information about its customers' property portfolios through a credit reference agency, although it refused to disclose which one.
Ms Piggott, who has three buy-to-let properties but only one with West Brom, said she would look into whether the lender breached any data protection rules when determining which customers had multiple buy-to-let properties in their portfolio.
She said: "A credit reference is not for deciding whether I'm a member of a category of people they think they can increase mortgage rates for. If I even suspect that they have broken the data protection rules, I'll be making an Information Commissioner complaint as well as an FCA complaint, and the complaint may well include the credit reference agency, depending on the circumstances."
Ms Piggott said she had lodged a formal complaint about the rate rise to West Bromwich and would try to progress her complaint as far as possible before it was applied in December.
She said she would pay the higher rate "under protest" from December – on the understanding that she would dispute the rise, and if she won all payments made should be applied to reducing her capital.
Daily Telegraph reader Shaun McAllister, who has a buy-to-let tracker mortgage with West Brom, has also lodged a formal complaint to the lender, saying it has breached the terms of the mortgage offer.
Mr McAllister said the description in the mortgage offer, dated September 13 2006, said that after September 30 2008 the mortgage would revert to a variable rate "which is the same as the Bank of England base rate, currently 4.75pc, with a premium of 0.99pc until term end".
He said at no point did West Brom explain it could amend the terms of the loan to suit its business needs.
In his complaint, Mr McAllister said: "We regard your company's behaviour and intentions as … an outrageous attempt to extort monies from us for which you have no legal basis to do so."
Another reader, Steve Hardman, said he could be forced to default on his mortgage if West Brom increased his rate in December, which would push up his repayments by £242 a month.
Other lenders hiking rates on loans that should track
Bank of Ireland customers have already faced large repayment rises.
In May, Bank of Ireland increased rates for 13,500 tracker customers from Bank Rate plus 1.75pc to Bank Rate plus 4.49pc for buy-to-let deals and Bank Rate plus 2.49pc for residential customers.
In October, Bank of Ireland's residential borrowers will suffer a further increase to Bank Rate plus 3.99pc.
Many of the bank's borrowers are furious about the decision and more than 300 are planning a class action against the bank, saying the increase is based on an unfair contract term.
In a small concession, the bank reversed the rise for 1,000 flexible account customers and 200 more who had switched to a tracker mortgage.
The financial ombudsman has received more than 300 complaints from Bank of Ireland customers about the rate changes so far, and it is carrying out an inquiry.
Virgin Money also altered its buy-to-let offering this week, increasing the rate borrowers revert to after their fixed or tracker period ends.
Previously, buy-to-let borrowers reverted to the lender's standard variable rate of 4.79pc, but from this week new borrowers will revert to a new, higher buy-to-let variable rate, which is currently 4.99pc.
Independent mortgage broker Graeme Pringle, who has a number of affected clients, said there were real concerns that other lenders would make similar changes. He said: "If West Bromwich get away with increasing their tracker margins beyond those which were clearly quoted in the illustration issued at the point of sale and subsequent mortgage offers, there's a serious risk that other lenders will be tempted to follow suit."
What to do if you're affected:
Complain to West Bromwich Building Society directly. You must do this before you complain to the ombudsman. You can find the address and email details for the society's complaints department at westbrom.co.uk/westbrom/complaints.West Brom should give you a final response within 28 days, or explain why it has not reached a decision.
If you have not received a satisfactory response from West Brom within six weeks, refer your complaint to the Financial Ombudsman Service. You can do this by filling in a complaint form on the ombudsman's website, financial-ombudsman.org.uk.

As Mark Alexander has said in a previous thread there seems to be a good reason for West Bromwich sufferers to ally with BOI sufferers. It's quite possible that the strategy for taking on these two lenders will be different and based upon the detail in offer and conditions paperwork. However the underlying principle is that a large group of borrows who had the common belief that they were on a lifetime tracker rate have had that illusion shattered. The sheer volume of people effected suggests that there must have been something blatantly unclear or misleading in the details which they received. The fact that the FCA does not seem to be supporting this is very questionable and I believe that only when enough people make themselves heard will someone in one of these government bodies take notice.
I will now been effected by both BOI and West Bromwich changes to rates differentials. Already I am facing the prospect of getting rid of these properties. If the lenders acted responsibly I would have expected a slow hike in rates but to double the differential in one go is difficult to cater for.

There are a number of possible fallouts if this strategy by lenders causes landlords to withdraw from the market. My properties were intended to be a pension provider because I don't believe the state system will necessarily be able to cope. I saw this as a sensible forward plan and I think that a vast number of small portfolio landlords have a similar purpose. Due to the turmoil in property values over the last few years I saw my portfolio as having to be a very long term investment. But if this starts to not look viable I will have to think again and some load may well fall back onto the state pension system. Politicians to take note....

Is there somewhere I can find step by step instructions on what action to take now I've received the letter - who to complain to how/when? I have already registered.

Reply to the comment left by "Sandra W" at "27/09/2013 - 12:29":

Hi Sandra

There is indeed, please see the link below.

I will also update the registration confirmation email to include this link.

Thank you for your support.
.

Reply to the comment left by "Mark Alexander" at "27/09/2013 - 12:35":

Many thanks, Mark

I really don't know what landlords and other borrowers are moaning about. You've had 5 years now of ZIRP, QE and recently you've got Funding for Lending, Help to Buy, and Osbornes debt monetization through the QE interest grab.

As someone who's worked and saved responsibly the policies I've mentioned make me extrememly annoyed. I know pensioners who have had to return to work well past their retirement age because of these policies. This is NOT free market capitalism. Without these policies landlords would be facing huge negative equity and high interest rates. My anger is towards the UK government of course who are the cause of all this, but I'm amazed that you borrowers think you've had a bad deal. Try looking at things from a pensioners point of view who has had to return to work or from someone who is seeing their life savings destroyed to save the banks and ultimately borrowers. These are the people who after 5 years of this really do have something to complain about.

Reply to the comment left by "Rob T" at "27/09/2013 - 14:32":

Hello Rob

It's not just landlords affected by this, many residential borrowers have tracker mortgages too. The Bank of Ireland also included residential borrowers when they increased their tracker margins in June of this year.

Which lenders will be next?

The Class Action group is forming to test the legality of these increases.

It is wrong that tenants, home owners and landlords could all end up paying more if these mortgage companies are allowed to get away with this.

We live in a free market capitalist country whether we like it or not but this is getting beyond ridiculous!
.

My story is same as most others. I have one WB BTL loan and four with other lenders. WB's letter says only multiple owners are affected. When I called I was told owning 3 BTL's qualifies as a multiple owner. Therefore single BTL owners not included. In the call the girl I spoke with (I have noted her name!!) said multiple owners were being TARGETED. When I said "so that means in effect you are screwing those you believe can pay" she tried to retract the word TARGETED. Cat is out of the bag.
So I'm delighted there are many willing to lob in £100 for the fight which needs doing. I'm in for sure.