Not upheld: lending decision and mortgage conversion fairness complaint against Bank of Scotland plc trading as Birmingham Midshires Mortgages

Decision detail

Summary

Mrs and Mr B complained to the FOS about a mortgage originated by Bank of Scotland plc trading as Birmingham Midshires Mortgages in 2004 and converted fully to interest-only in 2008. They sought rescission of the mortgage, refund of all payments with interest, and £5,000 compensation. The ombudsman found that BM's role was solely as lender, not adviser, and that both the 2004 lending decision and 2008 conversion were consistent with regulatory requirements and industry practice at the time each decision was made. The complaint was not upheld and no remedy was ordered.

The Ombudsman's reasoning

The ombudsman assessed the lending decisions against the regulatory framework and industry practice standards applicable at the time each decision was made, not current standards. In 2004, self-certified mortgages were standard practice and BM's underwriting focused on property suitability, lending criteria compliance, and affordability assessment. BM was not required to second-guess the third-party adviser's suitability recommendation. In 2008, the conversion was entirely at borrowers' request, they already had experience with interest-only borrowing, and BM's acceptance of their stated provisions and confirmation of independent advice was permissible under 2008 standards (stricter verification requirements only came in 2014). Neither decision created an unfair relationship.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website