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Society approves revised HSBC loan papers

26 March 2012

The Law Society of Scotland has approved changes to HSBC loan documentation, which it says is now fit to be used by Scottish solicitors.

Last month the Society advised members not to accept documentation issued by HSBC, in the form the bank sought to have solicitors use if mortgage borrowers from the bank chose not to instruct one of the small number of firms on the bank's revised panel, in view of the onerous undertakings required. Agreement has now been reached on revised terms following discussion with the bank.

Ross McKay, convener of the Society’s Property Law Committee, said: “I’m pleased to confirm that following our negotiations with HSBC, the bank has agreed to make essential changes to its documentation and we are content that it is now fit to be used and compliant with Scots Law and practice. In particular HSBC has accepted that the loan funds should be sent to the purchaser’s solicitor rather than direct to the selling agents.”

"We have resolved the issue through our discussions with the bank and appreciate the work HSBC has done to bring this about, but it was disappointing that there was no consultation with us before issuing the documentation, leading to a great deal of uncertainty for both solicitors and their clients.”

The Society advised that purchasers’ solicitors should nonetheless check that the revamped documentation is suitable for the transaction in question.

Mr McKay added that despite the positive outcome regarding the HSBC documentation, the Society still had significant concerns about the effects of the bank’s decision to restrict its formerly open panel to just four firms in Scotland.

He said: “This remains a major issue. While the size of the panel is a commercial decision for the bank to take, we believe that this is far too restrictive and fear that it will reduce consumer choice, particularly in smaller communities outwith Scotland’s main conurbations. There is also the unwelcome imposition of an additional fee of almost £200 on bank customers who choose their local solicitor for their purchase, rather than one on the HSBC panel.

“Scottish solicitors are subject to a strict regulatory and financial compliance regime and the risk of mortgage fraud here is much less than elsewhere in the UK. We fully support any measures which genuinely target fraud but it is difficult to see how a tiny panel will help. It may be that the separate representation of lenders and borrowers in all residential conveyancing transactions offers a long-term solution, but this would need close co-operation between lenders and the Society."

The new documentation is set to be issued by HSBC from Monday, 26 March 2012. Purchasers’ agents should contact the HSBC panel firm, not the Society, about the changes.

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