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Bank of Scotland accused of fraud by Northern Ireland's Attorney General


Northern Ireland Attorney General John Larkin

Northern Ireland Attorney General John Larkin

Northern Ireland Attorney General John Larkin

Bank of Scotland may have committed criminal fraud in how it dealt with some customers who fell into mortgage arrears, Northern Ireland's Attorney General has claimed.

John Larkin QC told the High Court in Belfast that the issue has been brought to the attention of the police.

His assessment came as lawyers for the bank dropped their appeal against a ruling that it had "unconscionably" double-billed some customers.

Earlier this year a judge held that its practice of restructuring and increasing monthly instalments plunged borrowers into depression.

At the time Master Ellison accused the bank of "having its cake and eating it". While he said there may not be any fraud involved, it was not regarded as fair accounting.

But in court yesterday the Attorney General described the original verdict as "unduly tender" on Bank of Scotland.

Acknowledging he was making a highly unusual intervention in a private law action, Mr Larkin claimed there was evidence of criminal fraud.

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Stephen Shaw QC, for the bank, contended that the Attorney General's view was based on a misapprehension. He also confirmed the planned appeal against the original ruling was being withdrawn.

Three test cases were originally brought by the bank involving claims for house repossessions. The court had to determine whether the lender can both consolidate mortgage arrears by increasing monthly instalments through a process known as capitalisation, and also rely on the arrears for possession proceedings. Master Ellision ruled that mortgages should no longer be regarded as in arrears once capitalisation has taken place.

He said the practice of unilateral consolidation is much more long-standing and common than first anticipated. The bank's reliance on extinguished arrears can be described as double-billing, he found.

"Unilateral consolidation with double-billing creates very real problems for borrowers, their advisers and the court," he said at the time. "To the extent at least of the double-billing, it is unconscionable."

The practice was said to unfairly and confusingly distort perceptions of affordability.

Borrowers in default are faced with increased monthly payments to deal with the arrears, along with a demand - and threat of repossession - for the immediate payment of the erstwhile arrears.

In response to Mr Larkin's claims, Bank of Scotland said: "There have been no allegations of fraud in these cases. We strongly take issue with any implication that this is the case."

It said it has offered to meet with the Housing Rights Service, one of the respondents in the case, and Mr Larkin "to correct the assumptions on which these allegations have been made".

"We work hard to ensure that we are providing customers facing financial difficulty with the right support to resolve the situation".


John Larkin has not been far from controversy since his appointment in May 2010. The UK Government distanced itself over comments he made arguing for an opt out of a same-sex adoption law. And using the archaic law of 'scandalising the court', he attempted to take a case against Peter Hain over remarks made in a book. He has also been criticised for suggesting abandoning Troubles investigations.

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