Barclays and BoS face group litigation by SAMS customers

by Gill Montia

Story link: Barclays and BoS face group litigation by SAMS customers

Barclays and Bank of Scotland are facing court action by over 300 homeowners who were sold shared appreciation mortgages (SAMS) during the 1990s.

SAMS provided a loan secured against the future equity growth of a property with the SAMS provider only repaid if the property is sold or the mortgage holder dies.

The majority of the loans were made on a zero interest basis, with the banks typically receiving up to 75% of the appreciation in value of the property (as well as repayment of the original loan) in return for having lent up to 25% of the property value.

With property price inflation rampant in the years after the loans were taken out, many SAMS holders have been unable to move because they have ended up owing their lenders colossal sums.

However, the High Court has now granted a Group Litigation Order against the banks, following recent changes in the Consumer Credit Act.

The changes have given UK Courts more freedom to rule on whether the relationship between a creditor and a debtor is “unfair” to the debtor, plus wider powers to vary the terms of the loan agreement.

Around 12,000 people are estimated to have taken out a SAM between 1996 and 1998 and around 7,000 of the loans are though to exist today.

In 2007 Barclays replaced 2,500 SAM loans with interest-free mortgages, offering borrowers the freedom to buy a more suitable equal-sized property, or to downsize.

However, Bank of Scotland has resisted easing the terms of its SAMS products.

Law firm RWP has been instructed to bring the group action.