Bank of Scotland plc · DRN-6234390

The complaint Mr and Mrs K’s complaint is about a mortgage they hold with Bank of Scotland plc (BOS). The essence of the complaint is BOS’s treatment of their long-term arrears, the interest rate it has charged, and the actions of the Law of Property Act Receivers (LPARs) BOS appointed to manage the property. Mr K, who has presented the complaint on behalf of himself and Mrs K (who has consented to him doing so) believes that BOS has treated them unfairly and is in breach of the Financial Conduct Authority (FCA)’s Consumer Duty. What happened The basic background to this complaint is well known to both parties so I won’t repeat the details here. Our decisions are published, and it’s important that I don’t include any information that might result in Miss C being identified. Instead I’ll focus on my decision and the reasons for it. No discourtesy or lack of care is intended by that. It’s simply a reflection of the informal service we provide, and if I don’t mention something, it won’t be because I’ve ignored it. It’ll be because I didn’t think it was material to the outcome of the complaint. This approach is consistent with what our enabling legislation requires of me. It allows me to focus on the issues on which I consider a fair outcome will turn, and not be side-tracked by matters which, although presented as material, are, in my opinion peripheral or, in some instances, have little or no impact on the broader outcome. What I’ve decided – and why I’ll start with some general observations. I can’t consider the fairness or otherwise of the actions taken by the LPARs, the fees they charge for the work they carried out, or the impact on Mr and Mrs K of the Receivers’ decisions. The Receivers, once appointed, act for Mr and Mrs K, not BOS, and there’s nothing in the evidence provided that cause me to suspect that BOS was or is controlling or influencing the LPARs since the appointment was made. The rules of the Financial Ombudsman Service don’t permit me to consider the acts or omissions of a party acting for a complainant. We’re not the regulator of financial businesses, and we don’t “police” their internal processes or how they operate generally. That’s the job of the Financial Conduct Authority (FCA). We deal with individual disputes between businesses and their customers. In doing that, we work within the rules of the ombudsman service and the remit those rules give us. We don’t replicate the work of the courts. We’re impartial, and we don’t take either side’s instructions on how we investigate a complaint. We conduct our investigations and reach our conclusions without interference from anyone else.

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In doing that, we don’t replicate the work of the courts. Whilst statutory, our scheme is intended to provide swift outcomes to disputes between business and the customers, with a minimum of formality. We’re impartial, and we don’t take either side’s instructions on how we investigate a complaint. We conduct our investigations and reach our conclusions without interference from anyone else. But in doing so, we have to work within the rules of the ombudsman service, which include our jurisdiction. We revisit our jurisdiction over a complaint at every stage of our case-handling process. I’ve looked at what the Investigator has said in her views, and what Mr K has said in response. Having done so, I’m satisfied that my remit to consider this complaint is confined to the following points, which I’ve summarised in my own words: • BOS’s handling of the mortgage generally between 22 January 2024 and 28 November 2025; • changes to the interest rate charged on the mortgage between 22 January 2024 and 28 November 2025; • BOS mistakenly applied a bankruptcy marker on one of its internal records; • communication between the borrowers and BOS (including a firm of solicitors I’ll call T in its capacity as BOS’s agent) between 22 January 2024 and 28 November 2025; and • how BOS managed Mr and Mrs K’s personal data. All other elements of the complaint fall outside our jurisdiction because; either: • they were referred to this service more than six months after BOS issued a final response giving six months’ referral rights to this service, and I’m not persuaded exceptional circumstances caused the delay; • they are new issues that have arisen since this complaint was referred to us, and BOS needs the opportunity to address them first, after which they can be referred to us for separate consideration if need be; or • they relate to the actions of the LPARs. I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. That includes Mr K’s submissions received on 21 February and 17 March 2026. Where there’s a dispute about what happened, and the available evidence is contradictory and/or incomplete, we reach our conclusions on what is most likely to have happened on the balance of probabilities. That’s broadly consistent with the test used by the courts in civil cases. It’s for us, rather than the parties to the dispute, to decide what evidence we need to reach a fair outcome. It’s also for us to assess the reliability of evidence, from both sides, and decide how much weight should be attached to it. When doing that, we don’t just consider individual pieces of evidence in isolation. We consider everything together to form a broader opinion on the whole picture. There’s something to clarify before I address the specific elements of the complaint. There’s some uncertainty over whether this mortgage was a buy-to-let from the outset, or a residential mortgage on which consent to let (CTL) was granted later. I raise this because Mr K has said that he believes BOS’s action are a breach of the Consumer Duty. It’s not clear from the available paperwork whether the mortgage is BTL or residential with CTL, but nothing turns on that, because the Consumer Duty does not apply either way.

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The Consumer Duty only applies to "retail market business" in accordance with the Regulated Activities Order (RAO) pursuant to the Financial Services and Markets Act 2001. What this means is that for any unregulated mortgage, as this mortgage is because it started in 2003, before the introduction of mortgage regulation, the Consumer Duty is not a relevant consideration. So it doesn’t matter whether it is BTL or residential with CTL. BOS’s handling of the mortgage generally between 22 January 2024 and 28 November 2025 I’ve already explained why, once the LPA Receivers were appointed, any act or omission on their part falls outside the jurisdiction of the service. But I can consider if BOS was justified in appointing the LPARs. Overall, I think it was. The mortgage had been in arrears for quite a long time, and BOS clearly had no confidence that Mr and Mrs K had a viable strategy for repaying the arrears within a reasonable period. That might be an unwelcome reality for Mr and Mrs K, but it was BOS’s judgement to make, not theirs and not mine. It’s important to remember that the mortgage is unregulated; I’ve noted what Mr K has said about the property being a family asset, but the fact is that it was being used for an enterprise engaging in commercial activity. A borrower doing that is held to a higher standard than a borrower who is covered by the regulatory protections that apply to residential mortgage. changes to the interest rate charged on the mortgage between 22 January 2024 and 28 November 2025 Mr K is unhappy that BOS hasn’t set the interest rate by reference to European market rates. However, it wasn’t required to; its reference point was the mortgage contract, which specified that interest would be charged at BOS’s own base rate, plus a margin of 1%. That’s what BOS has done. Insofar as BOS’s base rate is itself variable, the terms and conditions of the mortgage say, amongst other things, that BOS can vary the rate to reflect changes in market conditions. The primary factor influencing market conditions is the Bank of England Base Rate (BoEBR). During the period I’m able to consider, BoEBR has experienced three variations, each one being a reduction of 0.25%. BOS’s base rate, and by extension, the rate charged on Mr and Mrs K’s mortgage, has also experienced three reductions, each of 0.25% Another provision in the mortgage terms and conditions allows BOS to charge a higher rate on mortgages where the security property is being let out. BOS hasn’t applied that provision to Mr and Mrs K’s mortgage. Putting all of the above together, I’m not persuaded BOS has charged interest at a rate that is either unfair, or not permitted under the contract with Mr and Mr K, during the period I can consider. BOS mistakenly applied a bankruptcy marker on one of its internal records This did happen, and clearly, it shouldn’t have. But the issue of defamation doesn’t arise because the marker was never shared with any external party. When it was drawn to BOS’s attention, the business removed the marker and paid £70 compensation. In my view, that was fair, and no further action is needed. communication between the borrowers and BOS (including a firm if solicitors I’ll call T in its capacity as BOS’s agent) between 22 January 2024 and 28 November 2025 Mr and Mrs K live overseas, in a location with a substantially different time zone from the UK. Correspondence sent by mail takes a long time, but some correspondence has to be sent by post. I can’t hold BOS to be at fault in that respect.

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There have been problems with telephone calls, but not to the extent that I consider the wider handling of the mortgage, and the arrears on it, were affected. Much of the contact back and forth was about complaint-generation rather than the operation of the mortgage itself. Ultimately, communication issues flowing from their location is a situation for Mr and Mrs K, rather than BOS, to manage. They are not vulnerable simply because they have chosen to live overseas. Overall, I can’t rule out the likelihood that it’s not the medium of the contact, or ease of access, but the content of the communication, that is the underlying problem for Mr and Mrs K. So if the underlying content is reasonable, and I think it has been here, changing the delivery mechanism is unlikely to resolve things. how BOS managed Mr and Mrs K’s personal data. This part of the complaint came about after Mr K learned that BOS maintains a data centre outside the UK. Having no regulatory power means it isn’t in my remit to tell BOS where it should locate its data centres, or how it should ensure their operations meet statutory requirements on security standards. Such thing are a matter for the FCA and/or the Information Commissioner’s Office. Insofar as there’s no suggestion that Mr and Mrs K’s personal data has been in any way compromised, there’s no finding for me to make on this. My remit requires me to be objective, impartial, and to decide what is fair, reasonable and pragmatic in all the circumstances of the case. It also means that I’m not required to provide answers to every specific question that comes up if I don’t consider doing so will affect the overall outcome. I know this isn’t the outcome Mr and Mrs K wanted. They’re in a difficult situation and have my sympathy. But for all the reasons I’ve explained, I can’t find that BOS’s actions were unfair, however unwelcome they might have been. I very much hope that both parties can move on from here and resume a sensible dialogue going forward without recrimination over what has gone before. My final decision My final decision is that I don’t uphold this complaint. My final decision concludes this service’s consideration of this complaint, which means I’ll not be engaging in any further discussion of the merits of it. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs K to accept or reject my decision before 15 April 2026. Jeff Parrington Ombudsman

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