News focus: lenders in the line of fire
A row over the effect of lenders’ conveyancing panel policies on consumer choice escalated this week, with HSBC denying a claim that it is forcing customers to use firms on its new panel. The bank, which has 10% of the UK mortgage market, prompted outrage earlier this month by announcing the creation of a panel including just 39 solicitor firms.
The Law Society and others have raised concern about the role of panel manager Countrywide, which operates the largest estate agency in the UK and itself provides residential conveyancing through a licensed conveyancing company which has a place on the HSBC panel.
In one disturbing development, Melanie Lawrence, an associate at Hertfordshire firm HRJ Law, told the Gazette that branch staff had informed a client seeking a mortgage with HSBC that he must use a solicitor on its panel. Lawrence said the client, who was assertive and articulate, advised the bank that under no circumstances would he use a panel firm and that he would rather have a mortgage from a different lender.
Eventually, she said, HSBC told him that the mortgage element of the purchase would be conducted by ‘Countrywide’ for a fee of £192, which he would have to pay. The mortgage consultant advised the man to ask his own solicitors to knock that amount off their fee. Lawrence said: ‘Consumer choice is being completely restricted and clients will lose out.’
An HSBC spokesman apologised for ‘any misunderstanding’, adding: ‘All branch staff have been made aware of the new conveyancing panel and that customers are free to use their own conveyancer should they wish.’ The lender said it had introduced the new panel in response to the Financial Services Authority’s recommendations for tackling mortgage fraud.
However, the move has met with hostility from many high street firms, the vast majority of which will not be able to act for clients taking HSBC mortgages unless those clients are willing to pay for two sets of advice. Many high street conveyancers are already feeling the pinch of reduced transaction volumes.
Comments on the Gazette website questioned whether the 43 panel firms, 39 of which are solicitor firms and four licensed conveyancing companies, will provide sufficient coverage to enable customers to instruct a nearby firm. Some readers called on the Solicitors Regulation Authority to prohibit solicitors from acting for both buyer and the lender. Others warned that such a move would only work to drive work towards licensed conveyancers which, unless their regulator implemented a similar prohibition, would remain able to act for both parties.
Law Society president John Wotton has complained to business secretary Vince Cable about the bank’s decision, while talks took place last week between Chancery Lane and panel manager Countrywide. In an open letter to solicitors, Society chief executive Desmond Hudson urged solicitors to contact their MP in protest and consider using any shareholding they may have in HSBC to air their grievances. 'This decision by HSBC is damaging both to the consumer interest and to the profession, and operates in our view to no one’s interest other than the short-term interests of Countrywide and HSBC,’ said Hudson.
He said the Society itself is considering purchasing a small number of HSBC shares as a further avenue to press its concerns.
Andrew Bingham, sole principal at Leicester firm Bingham & Co, voiced the concerns of many conveyancers that other lenders would follow HSBC’s lead and reduce the size of their panels.
‘High street conveyancers are already struggling due to the market and referral fees, and if other lenders cut their panels, it will spell the end for high street conveyancers,’ he warned. Bingham also questioned the decision of HSBC to appoint
Countrywide to manage its panel. Bingham said: ‘The solicitors’ profession is now subservient to licensed conveyancers and has to go cap-in-hand to a firm of licensed conveyancers.’
The Gazette has sought clarification from HSBC on the process of appointing Countrywide and on any conflict of interest that may have arisen, as well as details of the fee arrangements between panel firms and Countrywide, and Countrywide and HSBC. Details of firms on the panel have also been requested, to give an indication of the panel’s geographic coverage. The Gazette also asked HSBC about its plans to extend the size of the panel, which it says is open for applications.
HSBC had failed to respond to any of these questions when the Gazette went to press. Countrywide could not be contacted for immediate comment. Other major lenders contacted by the Gazette, including Lloyds Banking Group, Santander and the Co-operative, all indicated that they had no plans to reduce the size of their conveyancing panels.
But in a separate development, Nationwide Building Society is undertaking another overhaul of its own conveyancing panel, removing firms that have not done work for its customers in the past 12 months. The Law Society criticised the use of ‘dormancy’ as a ‘blunt instrument’ that could result in firms that have high standards in conveyancing being removed.
Nationwide, which has around 10% of the UK mortgage market, has sent letters to some affected firms and will be sending others out over the next few weeks. A spokeswoman for Nationwide said the building society will retain its panel of several thousand firms. Firms with the Law Society’s Conveyancing Quality Scheme accreditation, or which can prove that they have been active in the previous 12 months, will be able to apply for reinstatement.
Hudson said he appreciated Nationwide consulting the Society, but added: ‘Dormancy based on zero transactions for Nationwide in 12 months is a blunt instrument for panel reviews. There are more sophisticated and accurate ways of assessing dormancy.’
Comments
Lenders panels
Surely the idea of lender imposed panels is in breach of competition law if it distorts the market in favour of a small number of powerful players.
The government cannot on the one hand say it wants to promote small businesses to reinvigorate the economy and then allow big business to fix the market so only big business benefits.
Solicitors and licensed conveyancers who run small practices will inevitably disappear from the high street if the coalition does not legislate to prevent the restriction of consumer choice by the banks. It is not realistic for firms to make a living out of conveyancing if they cannot also act for the lender in transactions.
The old system of allowing any firm who was regulated by the Law Society or CLC to be on the lenders panels made more sense as the regulators had decided who was qualified to do the conveyancing and the lenders accepted that. Quality Schemes, which individual law firms may apply for, should only be regarded as additional information for the consumer to assist him or her in making an informed choice and not a requirement to be on a lenders panel.
A true free market is one where the regulatory framework of competition is contructed in such way so as to allow as many people as possible to enter the market with good ideas to be presented to the consumer without cynical restrictions or manipulations designed by big business to serve the interests of big business. This is why government intervention is needed in respect of lender panels.
As the results of the ABS experiment are not known yet it would be unwise to further damage the independence of the legal profession by allowing the banks to proceed as they like in respect of lender panels. Remember the Home Information Packs farce which the government quite rightly scrapped?
The solicitors profession was under constant attack during the last government and is battered and bruised. A quite period of seeing how everything settles down without further major changes would seem wise, especially as economic recovery is the most important goal at the minute.
Lenders panels
The setting up of the HSBC panel is a cynical attempt to secure for a small number of firms a disproportionate share of the conveyancing market. Relying on consumer inertia those in the club hope to vacuum up those HSBC borrowers who believe that they have to use the firm acting for the Bank to do their purchase and at the same time pick up the sale instruction.
As both HSBC and Countrywide are both being very coy about the arrangement, it seems that there are aspects that they do not wish to share with outsiders. Why the secrecy, no ads on the TV about the great opportunity negotiated for their customer with 43 firms countrywide.
So come on HSBC and Countrywide lets have a bit of transparency. What are your criteria. How did you choose the first 43. Will the panel be bigger than say 50, what assurances have been given by Countrywide that their vetting procedures are better than the Law Society’s CQS to avoid mortgage frauds.
We could be sitting here till the cows come home waiting for HSBC and Countrywide break their vow of silence. What we as a profession can do is unite behind the Law Society and our local law societies in pressing the government to look into this cosy arrangement. To investigate whether it is the great advantage for the consumer it is heralded to be or just an attempt by big business to feather its own nest.
On an individual basis we can contact our MPs, because if we sit and do nothing we could be watching the demise of the small High Street practice. We are small businesses that have been progressively squeezed over the last decade. There comes a time when we have to say enough is enough
I am not taking it lying down, are you? You protect your clients rights, now do something to protect yourself and your family.
Yes
But, regrettably, HSBC will (rightly or wrongly) point to the FSA's "thematic review" of mortgage fraud, which contains some unhappy reading on the topic of solicitors:
http://www.cml.org.uk/cml/media/press/2950.
As is clear from the fifth paragraph of the article above this thread, HSBC are already saying that they introduced this panel as a response to the FSA's recommendations for tackling mortgage fraud. Whether one believes that or not (and whether one likes it or not), it makes sense to deal only with a small number of trusted firms, if one is going to be transmitting large sums of money to those firms.
hsbc
so it must be right to tar the whole profession with the fraud brush and then put all conveyancing into a panel managed set of paralegals managed by Countrywide and led by the best firm of conveyancers in the country Countrywide Property Lawyers, yeh right!
HSBC
Being a sad old chap, I did indeed read the FSA review; I could not see any where in it that suggested that that all fraud was all down to dishonest lawyers. Nor did I read that the way to avoid mortgage fraud was have a panel of just 43 solicitors/licensed conveyancers.
We must stop beating ourselves up about a few bad apples. We conveyancers had approx £140 billion of mortgage funds pass the through our businesses last year. Whilst any fraud is bad, where such large sums of money are involved it is never going to be reduced to zero. This is just a convenient hook on which to create a scheme to hive off 5% of the conveyancing market to currently 43 firms.
If we are all going to keep looking at our navels, we might as well hand the other 95% of the market to the HSBC panel participants.
Who are they; they seem a bit reticent to advertise this great leap forward on their websites.
Just to cheer myself up I Google Countrywide Property Lawyers to read their rave reviews. Obviously something not done by any executives at HSBC when considering their partners in trying to provide outstanding customer focused services, but then maybe that was not their intention.
Yes
I agree completely: I am simply pointing out that this is one of the lines argument which HSBC are going to run (and, indeed, are already laying the groundwork for) in defence of their new panel. The FSA review did not say that the problems are solely down to solicitors, but did report that "many lenders identified solicitors as their largest single source of mortgage risk" (paragraph 79).
Given that HSBC are going to put this forward as one reason for creating its new panel, the Law Society needs to come up with a good response to it. Since the FSA review was published in June 2011, what new steps have the Society and the SRA taken to try eliminate solicitors' involvement in mortgage fraud? If the Society and the SRA want to minimise the consequences of such fraud, why was there ever any proposal to amend the Minimum Terms so that they no longer require solicitors to be insured against claims by lenders? Do the aggregation provisions give sufficient protection to victims of fraud? Why has a firm which has recently gone into the ARP awarded CQS status? There are plenty of pertinent questions which the Society will need to be prepared to answer if it is going to take on HSBC over this issue.
The lenders were always going
The lenders were always going to identify solicitors as the greatest risk. They were certainly not going to point to their own irresponsible lending policies, or indeed the mortgage brokers, on whom many lenders relied for their clients, so that lending targets could be met.
It would be interesting to know if any response was made by the Law Society to the allegations of the lenders.
Law Society's response
If the Society did issue any press release responding to the FSA's thematic review, I have not been able to find it. It did, however, offer (in return for a payment of £35) a one-hour "webinar" which included "a summary of the expectations of lenders following the FSA's thematic review on mortgage fraud":
http://cpdcentre.lawsociety.org.uk/course/3289/mortgage-fraud-identifica...
This was the response of the Conveyancing Association:
http://www.theconveyancingassociation.co.uk/documents/201105FSAreport_00...
So, the Conveyancing
So, the Conveyancing Association's response was a typical "we're better than anyone else, send the work to us"! Hardly a defence of the probity of the profession or an attack on the lenders, was it?
HSBC Panel - Countrywide themselves a member! What !???
I thought Countrywide managed the panel which is bad enough, but one of 43 outfits on the panel too.....what!!!!
We have their letter of requirements - my goodness they are asking for too much and so delaying the deal. They are delaying it as they state they will not act quicker for instance than a minimum of 11 working days between request for funds and Completion.
Law Society please do not let standards in conveyancing fall even lower!
Take note Legal Ombudsmen
At least these 6 page letters will mean that for Countrywide & panel firms, if they make a negligence mistake in their own conveyancing, they can be hit over the head with their own checklist to say you knew to do all the things they are asking other lawyers to check/do.
Take note Legal Ombudsmen!
HSBC and Countrywide - have you moved your banking away yet?
So, which law firms have moved their banking away from HSBC, which law firms have suggested to IFAs and Estate Agents that they suggest buyers/borrowers think doubly carefully about using HSBC?
We do them all and have no banking with HSBC, and all employees of our offices are aware of the position so they can alter their own personal banking arrangements.
The Government should...no Panorama, Sky News and every other newspaper should be encouraged to investigate the mass farming of certain corporate estate agents of customers to average conveyancers, in return for massive cash back, or E/As who refer poor financial products, or over prices surveys, and certainly this HSBC/Countrywide (Countrywide! Of all conveyancing outfits, come on HSBC dont you do market research!!)
Come on Bob Woodward, there is a juicy story here that can realign quality in the conveyancing market by promoting the widest trained legal practitioners...Solicitors.
Have you got a story for Panorama?
Yes we do, lets all submit the same one to investigate, and perhaps including certain estate agents chains and their suspect tactics - farming of the public to certain conveyancers who have hidden extras, the selling of rip off surveys and 'not even close to whole or market mortgages' etc., and the 'no viewing until you see our mortgage adviser/sell through us too' tactic
Anyone care to send an email to them?
http://news.bbc.co.uk/panorama/hi/front_page/newsid_7755000/7755981.stm
HSBC and Countrywide
As I understand it from the blogs since this decision was published where one of the 43 act for the HSBC they send out a long list of requirements and essentially require various undertakings and for the solicitor to certify title and ID leaving HSBC's solicitor just to request the funds and presumably register title.
The other requirement is that the mortgage funds will only be sent to the sellers solicitors who will have to undertake directly to HSBC's lawyer to redeem the mortgage and send the transfer.
In fairness to lenders one or two individuals have perpetrated big frauds where the lenders losses would not be recouped from the PI insurance because it would not be enough. That is not a reason however to exclude the vast majority of solicitors who do their work well.
Now if the problem is paying the mortgage money to the borrowers solicitors surely the solution is to alter the rules so that the advance is paid to the sellers solicitors who undertake to the lender to redeem and send signed transfer. This can all be done through the buyers solicitor with a copy of the undertaking attached to the funds request.
This would save the inconvenience and expense caused to clients who wish to use their own trusted solicitor.
It would also stop the whole of the house selling market being stitched up by Countrywide, their 42 associates, estate agents and mortgage lenders. Once the competition is removed fees will then be put up considerably from the loss leader fees being charged now.
As usual the public will suffer and the big institutions will flourish at the expense of the smaller businesses. So much for a government which is oh so keen to promote and support small business.
Meanwhile don't expect the Law Society to do anything sensible other than promote the Conveyancing Quality Mark which the HSBC clearly regard as a waste of time as surely all those firms would be on their panel. If instead of introducing the Mark the Law Soc had fought the FSA's wrong assertions we might not be in this position. Instead they promoted the Mark which by itself
suggests to the public that the Law Soc thinks that vast numbers of its members are poor conveyancers and that qualification as a solicitor is inadequate.
All too little too late.
The advance monies cannot go
The advance monies cannot go direct from the lenders solicitor to the sellers solicitor because the buyers solicitor would not have all of the purchase monies going through their accounts.
HSBC and Countrywide
It is apparently the lenders requirement that they pay the mortgage money direct to the sellers conveyancer. As it is a requirement of HSBC that the monies should pass through our accounts they could hardly complain if they insist on sending their element of the funds direct!