Tim McMahon

Senior Associate Solicitor

DATE PUBLISHED: 07 Feb 2024 LAST UPDATED: 21 Feb 2024

A resolution of sorts: Bank of Scotland settles Shared Appreciation Mortgage (SAM) customer group action

On the eve of the beginning of a 6-week trial between Bank of Scotland and 15 leading cases of a 161-strong group of Shared Appreciation Mortgage (SAM) customers, it has been announced that the parties have come to an out-of-court resolution.

With the terms of the settlement being strictly confidential and there no longer being a trial which would have resulted in a legally binding judgment, it appears that the fight for those individuals who remain shackled to a SAM will continue. Despite the lack of certainty, there is some hope that the existence of a settlement in itself demonstrates a willingness by Bank of Scotland to come to a resolution which is acceptable to customers.

What are SAMs?

SAMs were predominantly offered by Barclays and the Bank of Scotland between 1996 and 1998. They were a form of equity release, allowing borrowers to receive interest and payment-free loans until they passed away or sold their property.

However, the arising issue from this product is that the redemption figure is calculated with reference to the capital appreciation of the property which the loan is secured against.

Due to the fact that property prices have typically increased substantially since 1998, SAM customers are now finding themselves in a position where they can owe hundreds of thousands of pounds to the bank, on an initial loan of a fraction of that.

What was the outcome of the group action?

Teacher Stern led a Group Action claim against the Bank of Scotland, relating to 161 SAM customers. The legal argument raised was that SAMs are an ‘unfair’ product and so sought a remedy under the Consumer Credit Act (CCA) 1974, which gives the Court broad powers to amend applicable agreements should it consider them to be unfair.

A joint statement from Bank of Scotland and Teacher Stern asserted:

“The terms of the settlement agreement are confidential. There are no changes to the mortgages or their terms and conditions”

Unsurprisingly, the settlement comes without any admission of liability from Bank of Scotland.

The result of this development is that there continues to be no judicial ruling on whether any SAM (which is subject to the individual facts of each customer) is unfair under the CCA 1974.

How can Ellis Jones help?

Our specialist Banking and Finance Litigation team has substantial experience in handling SAM disputes, with both Barclays and the Bank of Scotland. The firm is already in discussions with lenders’ representatives seeking a resolution to the disputes caused by SAMs. We can assist you by advising and subsequently advancing a claim or complaint to recover your losses or to reduce the amount owing under your SAM.

If you think the terms of your Shared Appreciated Mortgage are unfair, or you have otherwise been quoted an unexpectedly high redemption figure, please call the team on 01202 057733 or email banking@ellisjones.co.uk where we would be happy to provide you with information about how we can assist you specifically.

About the authors

Tim McMahon

Tim is a Senior Associate Solicitor in the Banking & Finance Litigation department and is based in our London office.

Bradley Moon

Bradley is a Paralegal within our Banking & Finance Litigation department, supporting the team across a diverse range of matters and is based in our London office.

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