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APPG Challenges Co-operative Bank on Treatment of Mortgage Prisoners & Unfair Rate Increases

APPG Challenges Co-operative Bank on Treatment of Mortgage Prisoners and Unfair Interest Rate Increases


The All-Party Parliamentary Group (APPG) on Mortgage Prisoners has written to the Co-operative Bank, the FCA and the FOS demanding action for Mortgage Agency Services No.5 (MAS5) mortgage customers who have been hit by unfair increases in interest rates.


The evidence uncovered by the APPG and FOS suggests that MAS5 treated customers unfairly and that the increases to the MAS5 SVR were not in line with the terms and conditions of the mortgage.


The FOS investigator found that MAS5 had treated a customer unfairly when it increased their Standard Variable Rate (SVR) from 2.99% to 5.75% over the period 2009 to 2012.


MAS5 increased the SVR four times over the period 2009 to 2012. It claims that each of these rises was necessary to reflect changes in the cost of funding.

  • On 1 July 2009 the SVR was increased by 0.75% to 3.74%

  • On 1 October 2009 the SVR was increased by 0.76% to 4.50%

  • On 1 March 2011, the SVR was increased by 0.75% to 5.25%

  • On 1 May 2012, the SVR was increased by 0.50% to 5.75%

In relation to the 2009 increases the FOS investigator found that MAS5 “had not provided any evidence to show that the costs of funds it used in its business increased”. In relation to the 2011 and 2012 SVR increases “[MAS5] hasn’t provided anything that relates specifically to MAS5’s own costs, or how these might have changed.”


The Co-operative Bank and MAS5 are now engaged in a Judicial Review to try and prevent the FOS from examining the fairness of the SVR increases in other cases.

The APPG has also received very disturbing reports about how MAS5 and the Co-operative Bank have been treating vulnerable customers and these have been passed to the FCA for investigation.


Seema Malhotra MP, Co-Chair of the APPG on Mortgage Prisoners said "The Financial Ombudsman's investigator concluded that the SVR increases by Mortgage Agency Services No.5 (MAS5) Ltd were unfair and not in line with the terms and conditions of the mortgage. These unfair increases have had a devastating impact on customers.


We hope that the Co-operative Bank will start living up to its ethical values and pay redress to the customers who have overpaid due to the misconduct. The FCA and the FOS need to intervene to protect these customers and stop MAS5 from dragging out these cases and causing more misery to vulnerable people. Many of these customers have serious health issues or financial problems."


Notes to editors


Contact: APPGMortgagePrisoners@Gmail.com


Mortgage Agency Services No. 5 Ltd is a subsidiary of the Co-operative Banking Group


Copies of the letters can be found through these links:


APPG to Co-operative Bank regarding MAS5


APPG to FCA regarding MAS5


APPG to FOS regarding MAS5


Actions requested from the Co-operative Bank / Mortgage Agency Services No.5 Ltd

  • Share all of the information submitted to FOS about MAS5 funding costs.

  • Immediately halt all threats of repossession to MAS5 customers paying the SVR.

  • Cut the rates paid by MAS5 SVR customers by 2.76% to reflect the impact of the unfair interest rate increases.

  • Pay redress to MAS5 customers for the overpayment of interest due to the unfair interest rate increases.

  • Allow all MAS5 customers to access Co-operative bank fixed rates by using the flexibility allowed in FCA rules to streamline any affordability assessment.

  • Institute an independent investigation into whether any staff within the Co-operative Bank or MAS5 sought to conceal the misconduct or failed to comply with the bank’s policies on the treatment of vulnerable customers.

  • Stop imposing confidentiality agreements on customers which prohibit them from sharing details of their complaints and MAS5 misconduct with the FCA.

Actions requested from the FCA

  • Open an investigation into the increases in the SVR by MAS5 during the period 2009-2012, including whether senior executives within MAS5 and the Co-operative banking group have misled FCA officials.

  • Order MAS5 to reduce the SVR by 2.76% to reflect the impact of the unfair interest rate increases.

  • Order MAS5 to pay redress to customers affected by the overpayment of interest due to the unfair interest rate increases.

  • Instruct MAS5 to halt any repossession action against MAS5 customers paying the SVR and to offer forbearance whilst this investigation and the assessment of the FOS complaints are ongoing.

  • Open investigations into the breaches of DISP rules by MAS5 and their treatment of vulnerable customers.

  • Undertake a 'lessons learned' exercise into why FCA officials and board members failed to uncover or properly investigate the misconduct within MAS5 when this issue was reported to them over the period 2019-2021.

  • Clarify whether the FCA regard it as acceptable for firms to impose confidentiality clauses on consumers which prevent them from reporting their concerns to the FCA.

Actions requested from the FOS

  • Communicates to MAS5 that all possession action should cease until these complaints have been assessed.

  • Reviews its decision to suspend consideration of the MAS5 complaints. In our view, and especially given the time which has already elapsed, consideration and assessment of these complaints should proceed alongside any Judicial Review. As the FOS has already investigated the interest rate rises and found them to be unfair this would have minimal resource implications for FOS and would ensure that these vulnerable customers get an assessment of their complaint within a reasonable length of time.

  • Explains why it believes that MAS5 customers “ought reasonably” to have been aware that MAS5 was misleading them about whether MAS5’s funding costs had increased.

  • Reopen any previously assessed cases involving MAS5 as the new evidence gathered by Mr Morris suggests that previous FOS investigators and Ombudsmen may have come to the wrong decision.

  • Report the issues raised by these cases to the FOS/FCA Coordination Committee and ensure that minutes of these meetings are published to aid accountability.

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