Mis-sold or Irresponsible Lending???

phil_pjb

Hi all, my first post so please be gentle.

I'm seeking advice of a family situation. My parents setup a mortgage deal for the life of the mortgage with Woolwich/Barclays in 2005 - part of this was a current account that ran alongside the mortgage account known as a "Reserve". This was accessible funds to the value of £25k (they weren't aware of this and never used it).

In 2008 they went for a loan, and were advised their best option was for a personal loan of £13,500 at 14.9% over 8 years to keep their payments affordable.

In 2012, I did a financial review with them and found out that this loan was still active - I advised them to go back to the bank and renegotiate the loan for a more realistic rate of 7/8% - when they came back, they said that they'd been offered the money at 4.1% against the reserve account they already had in place against the mortgage.

They didn't (probably should have) know about the reserve account and its flexibility until 2012 when it was highlighted by the bank under the same circumstances as in 2008 - its my view that the bank either missed the account on their profile, or the wanted a great sale on a loan for their figures... the difference is in excess of £5k because of the difference in rates.

I've complained to the bank and after 2 hours of trying to explain the situation I got a refusal letter back about my complaint which didn't resemble my complaint, and the ombudsman are taking their time and don't appear to get my point either (after 6 conversations with them).

Am I barking up the wrong tree or do I start stamping my feet??

DevCoder

You're barking up the wrong tree, you should fully understand the financial products you have at your disposal, admittedly the bank could have looked into this with the original loan but they were under no obligation to do so.

somethingcorporate

Check the original paperwork. If the reserve account was explained as part of this then you do not have a leg to stand on really.

The bank would have no way of knowing that you did not want a loan on top of what was available in the reserve account and I do not believe it should be their responsibility to explore all the element of previously sold products to you as to whether they have a baring on your current applications.

lippy1923

You say they were not aware of the reserve - Rubbish! unless you can prove it. It would have been explained to them and written in all their paperwork.

You are barking up the wrong tree as suggested by krisdorey.

phil_pjb

Oh Lippy - which part of "be gentle" didn't you understand. Do you really thing any realistic human would take a 14.9% over a 4.1% loan?

Thanks for the replies - in fairness it would have been explained to them as part of the product so they "should" have known about it an utilised it, not everyone is totally switched on with what's available on accounts, loans, insurances etc... I have a premier account with Barclays and would class myself as relatively savi in comparison, but I don't know all the options and their limitations. While we should... not many read ALL the small print.

They went into the bank in good faith to seek advice on borrowing and 4 years later they had a more switched-on professional that was able to highlight their best option at the cost of £5k - I just think it should have been the case 4 years previous...

Thanks again for the reality check ;-)
All the best

lippy1923

Sorry if that came across a bit harsh.

michael1983l

The loan from the reserve account is secured against the property, the personal loan is not secured against the property. They are two completely different products, hence the massive difference in interest rates.

There are no grounds for complaint here.

claret_mike

So has advice been given from turning previously unsecured lending into secured lending? Not suggesting the bank have done anything wrong but this should have been made clear and it should be clear in paperwork that this is now secured.

michael1983l

claret_mike wrote: »

So has advice been given from turning previously unsecured lending into secured lending? Not suggesting the bank have done anything wrong but this should have been made clear and it should be clear in paperwork that this is now secured.

When they agreed to the Woolwich offset Mortgage they agreed that any money borrowed from the reserve account would be secured against the property.

gb12345

michael1983l wrote: »

When they agreed to the Woolwich offset Mortgage they agreed that any money borrowed from the reserve account would be secured against the property.

Yes, but they have now converted a previous unsecured loan into a secured one by using the Reserve account.

I wonder if the OP realises what he has persuaded his parents to do, because I doubt the parents are clued up enough to know.

michael1983l

gb12345 wrote: »

Yes, but they have now converted a previous unsecured loan into a secured one by using the Reserve account.

I wonder if the OP realises what he has persuaded his parents to do, because I doubt the parents are clued up enough to know.

Yes they have and judging by what the OP has said here they do not realise that this is a secured loan. Trouble is that it doesn't matter much because it was in the T&Cs of the mortgage agreement that their parents agreed to, so they have not been mis-sold anything in that respect.

Also addressing the original concern of the original loan being mis-sold because they could have withdrawn the loan from the reserve account instead at a lower rate. Well this would be invalid too because the bank would just assume that they did not want the money secured against their property and gave them a rate that reflected the risk to the bank. Comparing unsecured loans with loans secured against your property is like comparing apples with pears.