A u-turn by HSBC over a controversial scheme to replace its open conveyancing panel with just 43 firms has been welcomed by the Midland legal world.
The turnaround follows complaints from lawyers and members of the public about delays to the home buying process and lobbying by the Law Society.
From August the bank will allow any of the 1,419 law firms accredited with the Law Society’s Conveyancing Quality Scheme (CQS) to carry out legal work for the bank and for the borrower.
It was in January this year that HSBC announced customers would have to use the panel, a move which took the legal world by surprise and was widely criticised.
Although HSBC did increase its panel to 48 firms, with another 50 going through the application process, it remained deeply unpopular.
HSBC mortgage customers will now be able to choose from three options. They can either use one of the law firms on the original panel or use one of the CQS firms and in both cases the firm can act for the bank and the borrower. There will be a limit of a £150,000 mortgage value for sole practitioner CQS firms, though this may be reviewed in the future.
Alternatively they can use any solicitor they wish with the bank appointing one of their panel firms to act for the bank, an option which involves the borrower paying a charge of £192 for HSBC’s legal work.
Solicitor Sarah Dwight, chair of the Birmingham Law Society property and development committee, said she believed the CQS scheme proved “crucial to the turnaround by HSBC”, something she felt represented “a small victory for the Law Society”.
She said: “We can only wonder what made HSBC change its mind in the space of less than six months - was it the Law Society and a coordinated campaign headed by Chancery Lane or was it the influence of consumer groups, such as Which?.
“Whichever of these it was, it was clear the decision to have such a small panel of firms was causing disadvantages to our clients - the consumer. Estate agents were becoming reluctant to sell houses to buyers who said they were having a mortgage with HSBC. So it was a victory to the profession that the bank saw sense.”
But Ms Dwight warned against complacency and said it could herald a move by other lenders to only use CQS accredited firms.
She added: “Firms should not rest on their laurels as it is increasingly likely that other lenders will now insist on CQS accreditation before allowing a firm to remain on its panel, and this is evidenced by such big lenders as Santander and Nationwide now insisting that all new panel applications are only to be made by CQS accredited firms.
“The head of mortgage fraud at Lloyds Banking group has said that mortgage lenders need to agree a system that allows them collectively to vet law firms that want to be on conveyancing panels and what better way of doing it than by the CQS scheme.”
Ms Dwight said the move towards panels and the establishment of CQS just over 12 months ago, were in part as a result of concerns over a rise in mortgage fraud.
“The birth of CQS was a direct response to prevailing market conditions and the vulnerability felt by lenders in the face of escalating levels of mortgage fraud,” she said.
“It is also likely that the HSBC decision was a reaction to the FSA insisting that lenders manage and monitor the firms on their conveyancing panels more closely in order to reduce risk and reduce mortgage fraud.
“The legal profession may not be impressed with the way that the lenders have approached the problem of fraud but it does pose a major problem for all concerned in the property industry.
“It is essential that we all play an active part in combatting fraud and the Law Society have sought to do their bit by the introduction of the CQS scheme and the SRA have added their views by setting out practice rules as to how to spot a bogus firm.”
Birmingham based Challinors’ property team leader Sarah Pottle, who was a vocal critic of the original HSBC decision welcomed the u-turn and said: “I had hoped they would do it but wasn’t necessarily sure they would.
“Like any business once you have committed to doing something - bearing in mind the costs and time involved in setting it up - it is unusual for them to admit that maybe it wasn’t working and bow to pressure - especially a big organisation like a bank.
“There is no doubt HSBC were and are going for a large portion of the mortgage market. They have got very competitive deals and the reality of that is a lot of people are using them for mortgages. They were getting a lot and weren’t able to deal with the volume - the cracks were starting to show very quickly - and I think this is the right thing.
“They haven’t gone back to a completely open panel but with CQS have chosen the middle ground.”