Overcharging scandal could hit millions

Overcharging on mortgage accounts is potentially a “bigger problem than mis-selling endowments”, members of the Financial Services Consumer Panel told Mortgage Strategy last week.

The panel – which reports to the FSA – is currently investigating the scale of the problem. A spokeswoman says: “The panel is looking at whether incorrect mortgage calculations are a systematic issue or more a case of one-off mistakes being made.”

Mortgage auditor MortgageCheK has estimated that up to two million borrowers are paying the wrong amount. The panel has approached the CML with a view to researching the issue among lenders.

Sue Anderson, head of external affairs at the CML, says: “This is at an early stage and I can&#39t tell you if we will be actively involved.”

But Nick Pearson, panel member and national money advice co-ordinator at Federation of Information and Advice Centres, says: “We are concerned about how many people may potentially lose their homes on the basis of arrears that simply aren&#39t there.”

Evidence from auditors suggests that accounts already in arrears run a greater risk of overcharging, possibly because of the extra manual administration involved.

“If this is widespread it is a big deal. If these figures are even half right, there could be a bigger problem than mis-selling endowments in terms of money involved.”

Pearson says that the evolution of more complicated mortgage products is making it harder to pick up mistakes and he adds: “There is a price to be paid for innovation, and that price is the likelihood of more errors. There are something like 4,000 mortgage products and we just don&#39t know the scale of the overcharging problem.”