Bank of Scotland plc · DRN-6174381

The complaint Mr H has complained that Bank of Scotland plc didn’t contact him when it said it would, and says he then heard nothing further for a year at which time Bank of Scotland said it would be pursuing legal action on his mortgage. What happened Mr H has a mortgage with Bank of Scotland that he took out in 2002, borrowing £476,000 on an interest only basis over a 25-year term. The rate of interest was stated to be 1% above Bank of Scotland Base Rate (which I understand has been the same as the Bank of England base rate). In 2018 Mr H unfortunately first suffered from a health condition (that I won’t detail here to protect his privacy) and he’s told us that had a serious impact on his personal circumstances and his ability to work. There were a few unpaid direct debits over the next few years, and then a payment was made in June 2021 after which there were no further payments (other than a one-off payment in September 2023). I won’t detail all the history of conversations between the parties, but one or two occasions in 2022 and 2023 matters progressed to the point a court hearing was arranged, but both times those were subsequently cancelled. In December 2023 Bank of Scotland’s solicitor told Mr H that it had applied for a new hearing date, and then in February 2024 Mr H sent an email to Bank of Scotland’s solicitor. At that time the arrears stood at around £47,700. Unfortunately due to an internal error, that information wasn’t received by Bank of Scotland and there then followed 11 months of inactivity, with both Bank of Scotland and its solicitor noting they were waiting for the other. This came to light in January 2025, and when Mr H found out that Bank of Scotland was going to progress with legal action he raised a complaint in February 2025. Bank of Scotland didn’t uphold the main thrust of the complaint, although it did send a cheque for £200 in acknowledgment it should have tried to contact Mr H at some point between February 2024 and January 2025. It said that was an error on its part, but Mr H also had a responsibility to get in touch when he hadn’t heard back. It said the last substantive conversation had happened in October 2023 when Mr H was told the next step would be obtaining a hearing date, and it was left that Mr H was going to provide his income and expenditure information, but he didn’t do so. It said, if contact had been made in the 11 months, it would have been of a similar nature as it can’t allow a mortgage to remain unpaid indefinitely. It said, going forward, there was little scope for a longer term option as Mr H already had an interest only mortgage, and the product he was on was very competitive so no real savings would be made by moving to a fixed rate product even if one would be agreed. It said it would put a 30 day hold on the account to allow Mr H time to investigate the possibility of an equity release mortgage, and if nothing was forthcoming then

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it may apply for a hearing date. It said it wouldn’t consider allowing the interest to just roll-up on the mortgage, which is what Mr H had requested. Unhappy with that, Mr H referred the complaint to our service where it was looked at by one of our Investigators. Our Investigator didn’t uphold the complaint. She said at the point Bank of Scotland applied for a hearing date in December 2023 it had only received one payment from Mr H since June 2021. She said due to a mistake by Bank of Scotland’s solicitor, it was unaware Mr H had sent in updated medical evidence in February 2024 and so neither Bank of Scotland, or its solicitor contacted Mr H for around a year. She felt Bank of Scotland’s payment of £200 compensation was fair and said that Mr H could have got back in contact when he hadn’t heard anything back. She also said that she didn’t think Bank of Scotland had done anything wrong when it wouldn’t allow the interest to just roll up, wouldn’t accept a reduced settlement figure or allow the situation to continue without taking legal action. Mr H didn’t agree with our Investigator’s findings and so the case was passed to me to decide. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Although I’ve read and considered the whole file I’ll keep my comments to what I think is relevant. If I don’t comment on any specific point it’s not because I’ve not considered it but because I don’t think I need to comment on it in order to reach the right outcome. I’m very sorry to hear of Mr H’s situation and everything that he and his family have experienced. I can’t imagine how difficult things have been for them. I’ve taken everything he has said into account. But I’m afraid that, having done so, I don’t think I can fairly uphold this complaint. I’ll explain why. In deciding what’s fair and reasonable in all the circumstances I’ve taken full account of relevant law and regulations, including the Equality Act, as well as the regulator’s consumer duty rules (where relevant), the rules of mortgage regulation and the regulator’s guidance on tailored support for borrowers in financial difficulty and on the treatment of vulnerable customers. Although Mr H has said by allowing the interest to roll-up for 11 months Bank of Scotland set a precedent, but that’s not the case. It had been made clear to Mr H in the years running up to February 2024 that Bank of Scotland expected monthly payments and, if those didn’t resume, it would be taking legal action. I’m satisfied that there wasn’t any agreement to waive payment and instead allow the interest to roll-up. That means that Mr H was – and still is - required, under the terms and conditions of the mortgage, to keep up with the monthly payments until the balance is repaid in full. The email Mr H sent to Bank of Scotland’s solicitor on 12 February 2024, which was the start of the 11 months in question, enclosed a copy of a medical letter. In his email he said the major impact on him had been on his memory, almost completely limiting his ability to work and earn a living. He then said “The positive news however is that I am now on a course of medication that appears to be working and my memory is slowing improving […] My business activities have started again and earnings are resuming.” He closed by saying he was booked in for a call back from the Bank of Scotland team, and he needed to get something agreed for his own sanity and wellbeing. The medical letter supported what he said.

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A further medical letter from April 2024 said “He is feeling less tired and more clearheaded” and “He reports no significant memory problems.” And then in July 2024 “His memory is slightly better overall…” and it recorded his immediate recall as 5/5 and delayed recall as 4/5 with the commentary that it improved to 5/5 following a single clue. As Mr H had been in contact with Bank of Scotland and/or its solicitor in the period things had been worse (by his own admission in that email, things were improving at that time) then he could have been in contact in those 11 months. He knew he was waiting to hear from Bank of Scotland and/or its solicitor and hadn’t, so he should have made contact himself to find out what was happening. That’s not to excuse Bank of Scotland for its error in not making contact in that period, but as a mortgage holder Mr H also has a responsibility here. Mr H has said that if he’d received a response he would have looked at equity release at the time, and his balance would be lower by around £30,000-£40,000. I’ve given that point a great deal of thought, but overall I’m not persuaded by it. Legal action had been started in 2022 and 2023 and Bank of Scotland had been clear that the situation couldn’t remain as it was. In a call in October 2023 Mr H had said he planned to enter into a payment plan until the end of the term, and then downsize, with Mr H knowing the payment plan needed to be the full contractual monthly payment plus a sum towards the arrears. In November 2023 Mr H said he was due to start a new job in December or January for which he would be earning £8,000 a month, and he was warned that Bank of Scotland intended to obtain a hearing date so any arrangement could be secured by a suspended possession order. So it seems Mr H was on notice he needed to do something and that Bank of Scotland required monthly payments to be made. His email talked of an improving situation and he didn’t ask for his interest to be rolled-up, nor did he express the belief that if a response wasn’t received then the interest would be rolled-up and/or that Bank of Scotland wouldn’t take any further action. All that is likely to have happened if Bank of Scotland had been in contact sooner, is that it would have pushed ahead with legal action sooner. And bearing in mind that is something Mr H is, understandably, trying to avoid that would have put him in a worse position than he is now as he’s had an additional 11-months of no action being pursued. Mr H didn’t put anything in place to move things forward between June 2021 and February 2024, nor does it seem that the situation has improved since January 2025 despite Mr H saying that in May 2025 his condition was in remission, everything had normalised and he was restarting his business activities, so it seems unlikely that any contact within that 11-month period would have meant Mr H would have done something that he hasn’t done in the other 45 months. In all the circumstances, I don’t consider it likely that Mr H would have applied for an equity release mortgage (or taken any other action to mitigate matters) at the time had a response been sent when it seems he hadn’t done so before then, and whilst he has said he’s applied for one since, it seems that has not progressed to completion. Mr H has said that during the 11-month period his health, cognition, and capacity to chase Bank of Scotland was significantly impaired by his medical condition. I’ve a great deal of sympathy for Mr H’s situation, it is clear he has been through some very difficult times, so I don’t say this lightly. But those issues may also have impaired his ability to take out an equity release mortgage. Whilst he could appoint a broker to act on his behalf in any application, there’s no doubt in my mind that even a broker-led application would be significantly more difficult than just sending a letter or email, or making a phone call to Bank of Scotland or its solicitor to chase things up, which Mr H has said he wasn’t in a position to do. Mr H has said it is concerning that our Investigator made her own assessment of how his health concerns affected him, and she was substituting her unqualified clinical judgement for

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that of his consultant. But that’s not the case. Mr H has supplied various medical documents from over the years, and all those indicate Mr H was improving from 2024 so, if he was able to be in contact with Bank of Scotland and its solicitors between 2021 and the start of 2024, it follows that the documented improvement in his health from January 2024 supports the fact he could have contacted Bank of Scotland, or its solicitor, himself to follow things up when he hadn’t received a response. Mr H has said it wasn’t up to him to repeatedly chase things up, but he didn’t need to do so repeatedly, he only needed to do so once (which he didn’t do). It would be a different matter if Mr H had made contact with Bank of Scotland and/or its solicitor in those 11-months and still nothing happened, but he didn’t. Mr H knew a call was due to happen, and he even said in his email in February 2024 that he welcomed it. Mr H has been in arrears – and the arrears have been increasing – for a long time. I understand in August 2025 the arrears alone were more than £100,000. Whilst Mr H has said, at various times, that things are improving and he will start paying, at the last update we had, that still hadn’t happened. For instance, Mr H has said he made an offer in January 2026 to restart his payments but he didn’t receive a response, so it seems he didn’t pay. But mortgage payments aren’t optional, so even without a response Mr H should have started paying as soon as he was able to – even if it wasn’t the full payment due each month. The purpose of forbearance is to find a way to get a mortgage back on track – for example, by allowing a borrower time to find a way of meeting the mortgage payments (such as a temporary reduced payment arrangement following loss of a job, until finding another), or by agreeing an arrangement to repay arrears over time. The rules of mortgage regulation say that a lender should consider all forbearance options, treating repossession as a last resort. I’m satisfied that’s what Bank of Scotland has done in this case. It has allowed Mr H to make no payments at all for almost five years without taking possession of the property. Bank of Scotland allowed Mr H substantial time and space to find a way to get things back on track but that hasn’t proved to be possible, and the mortgage only became more unaffordable over time as the arrears increased. Bank of Scotland has an obligation to offer reasonable adjustments to customers with a disability, and to treat customers with vulnerabilities fairly. I’ve taken that into account. Bank of Scotland has given Mr H nearly five years now to bring things back on track, or take steps to bring the mortgage to an end. I think that, in the circumstances, it has shown considerable forbearance. I’m satisfied it has made adjustments for Mr H – including periods of non-contact, and allowing forbearance to continue for nearly five years without progressing repossession action. But Bank of Scotland’s regulatory and legal obligations don’t mean that it has to write the mortgage off, stop charging interest, or not expect payments to be made and instead allow the interest to roll-up. As the Court of Appeal has said1,reasonable adjustments under the Equality Act do not extend to fundamentally changing the nature of the mortgage agreement. Whilst that case was about a request to switch from repayment to interest only, the same arguments would apply here as allowing the interest to roll-up rather than being paid monthly as per the contract would also fundamentally alter the nature of the mortgage agreement. This is a mortgage with regular monthly payments expected. Bank of Scotland has, by way of forbearance, allowed Mr H not to make payments for a number of years. But that doesn’t mean it has to continue to do so indefinitely if continued forbearance is no longer appropriate, or that it isn’t allowed to continue to treat this as a mortgage with monthly payments due. Nor does it have to agree to Mr H’s timescales on selling the property. 1 Green v Southern Pacific Mortgage Ltd & Anor [2018] EWCA Civ 854

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In conclusion, and while I know how upsetting this will be for Mr H, I’m afraid that I can’t fairly uphold his complaint. I do have a great deal of sympathy for the situation he and his family find themselves in. But I don’t think their situation is Bank of Scotland’s fault. Bank of Scotland has acted fairly and sensitively and has given Mr H as much time as can reasonably be expected to try and bring his mortgage back on track or bring it to an end. I agree that Bank of Scotland made a mistake when it didn’t contact Mr H for 11 months, but for all the reasons I explained I don’t think that delay caused any detriment to Mr H and instead has just given him longer in the property without making his payments. Bank of Scotland sent a cheque for £200 in acknowledgment of its mistake in not contacting Mr H for 11 months, and having considered everything very carefully I think that is fair. My final decision My final decision is that I’m satisfied the £200 Bank of Scotland sent when it responded to the complaint is fair. If Mr H didn’t cash the cheque, and would now like to accept that sum, I would ask he contact Bank of Scotland directly to arrange that. I make no further order or award. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr H to accept or reject my decision before 15 April 2026. Julia Meadows Ombudsman

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