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England's Law Society takes on HSBC

Nigel Morris-Co...

The Law Society of England and Wales is mounting one of its biggest PR campaigns ever as HSBC, one of the largest residential mortgage lenders in the UK says that all its mortgage work is to be handled by only 43 firms.

LawSoc describes a recent meeting with HSBC as "cordial." But HSBC left without any, or any significant changes to its plans.

As a result, LawSoc is mounting a massive campaign to bring public and political pressure to bear on the bank.

Amongst the complaints are that the scheme will be managed by Countrywide which is also a member. The bank has declined to say how the 43 firms were selected and LawSoc says that the selection process and criteria should be made public.

The bank adopts a simple and brutal position: it's the bank's money and the bank's risk. As a result, the bank is entitled to decide how it is managed.

Panels have been the norm for many lenders for several decades - but usually it has been small building societies and secondary lenders who have adopted the tactic.

The bank has a valid argument which, so far, LawSoc has not publicly considered. Under Regulations to combat money laundering, it is at least arguable that the bank is responsible for ensuring that those who deal with its money have in place effective counter-money laundering systems and controls. All over the world, law firms are notoriously neglectful of their duties under such Regulations. If the bank does, indeed, intend to use this policy to push down compliance and risk management to the 43 firms, then there is merit.

But all too often, panels have led not to improved service but to worse service for buyers - and increased costs.

Fees on conveyancing transactions are constantly under pressure and although solicitors are entitled to charge borrowers an additional fee for acting for the lender, they frequently do not do so. There is no scale fee in England and Wales requiring conveyancing lawyers to charge a minimum fee and not to use what amounts to give-aways as part of a package pricing.

But conveyancing solicitors have often complained that panel solicitors - who have to investigate the title to the property -often adopt an unwieldy process which is systems not skills or knowledge driven or require the borrower's solicitor to complete a questionnaire and to certify the title. In other fields, for example personal injury cases, the experience is that a small number of panel solicitors means a great deal of work which is often done by inexperienced or junior staff. In mortgage related work, the handling of repossession work by a small number of firms in the 1980s housing crisis led to many complaints of harsh treatment by clerks employed by law firms.

LawSoc aims to use public and political discontent with the banking sector as leverage to press its case. In a statement to solicitors issued in the past few days, it says "the current banking sector in the UK is very much under the microscope. Not only are other organisations keeping an eye on banking practices, the public remain cautious."

Leaving aside for the moment the disturbingly poor phrasing from an organisation that is supposed to communicate on behalf of a profession the primary purpose of which is to communicate, the import is clear: LawSoc aims to try to turn customers from HSBC.

Already, the statement says, LawSoc has withdrawn all funds it held with HSBC and its group companies.

HSBC asked firms to apply to be on the panel: LawSoc hopes to encourage the bank to change its plans by the litigation technique of "death by paper." It has asked all unsuccessful firms to appeal against the decision. That will mean hundreds of appeals.

LawSoc says that clients are unhappy at the idea - and they may well have good reason. A kit has been prepared for clients to use to write to HSBC and tell them that they have lost the opportunity to grant a loan because of the policy. Just how far that will go remains to be seen.

LawSoc is also using pressure group Which? to argue its case.

Dominic Hudson, Chief Executive of LawSoc says "I remain unpersuaded that legal proceedings are the appropriate step at present." It is difficult to see what grounds there would be for such proceedings: the use of panel solicitors in conveyancing cases is very long established. Challenging such a scheme will involve unravelling much history.

There is another issue: HSBC might be taking pre-emptive steps to secure its position prior to yet another round of deregulation in the legal industry. If that is, indeed the case, then other banks are likely to consider the same policy.


The author was a solicitor in private practice in the UK and is now retired.



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