Elderbridge Limited · DRN-3970674

The complaint Ms I complains about her second charge mortgage (secured loan) with Elderbridge Limited. What happened Ms I took out a secured loan with a company I’ll call F in 2006 over a term of 7 years, ending in 2013. Unfortunately Ms I lost her job and fell into financial difficulties. She was unable to keep up with her payments. Ms I wasn’t making payments for a long time and in 2008 F went to court and obtained a suspended possession order. However, Ms I made no further payments after the end of 2008. Around this time, F removed interest from the main balance. It continued to charge interest, but rather than adding it to the loan balance, it put the monthly interest in a separate account. This meant that if Ms I did make any payments, they would reduce the capital balance first – reducing future interest. And it meant that from then on Ms I was charged simple interest rather than compound interest. So this made the loan less expensive overall. It seems F then took no further action until the loan was transferred to Elderbridge in 2016. Elderbridge noted that the term had ended in 2013 and no payments had been made for a long time. In 2017, it sent a field agent to the property. As Ms I still made no payments, Elderbridge instructed solicitors with a view to taking new repossession action. Following this, Ms I got in touch with Elderbridge and completed an income and expenditure form. She offered to pay £1,000 per month. Elderbridge accepted that offer and Ms I made the payments until November 2019. In January 2019, Ms I asked Elderbridge to review the payment arrangement. She said she couldn’t afford the payments herself and it was her daughter making them. Elderbridge asked Ms I to complete an updated income and expenditure assessment. Elderbridge agreed to accept £700 per month, but Ms I continued to pay £1,000 until November 2019. In September 2019, Ms I again asked Elderbridge to review the payments. She also asked it to consider stopping charging interest altogether. Elderbridge didn’t agree – it said given the amount of the outstanding debt, and that it was already separating interest from the main balance, stopping charging interest altogether wouldn’t make a significant difference to the overall time it would take Ms I to repay the loan. It said that even at £1,000 a month it would still take Ms I over four more years to repay the loan – despite the term having ended in 2013. It said that if Ms I could no longer afford the payments, she should take independent advice or consider selling the property to repay the loan. It agreed to accept reduced payments of £500 for two months to give Ms I time to consider her options. After that arrangement ended, Ms I continued to pay £500 rather than £1,000 per month. In May 2020, Elderbridge agreed a reduced payment arrangement of £300 per month to help Ms I through the impact of the coronavirus pandemic.

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In July and August 2020, Elderbridge asked Ms I for bank statements and medical evidence so that it could consider what an affordable arrangement would be going forwards. Ms I didn’t provide them, and in December 2020 and January 2021 Elderbridge again discussed what she could afford with Ms I. At this point, Ms I was still paying £300 per month. Elderbridge decided that it would take legal action to repossess the property. A hearing was listed in May 2021, but Elderbridge asked for an adjournment to allow Ms I to seek advice. In 2022, Ms I offered to increase the monthly payments to £500 and then £715. Elderbridge refused this offer because it said this would mean it would take a long time for the loan to be repaid, and because there was no evidence that this amount was actually affordable for Ms I. A further court hearing was set for July 2022, but Elderbridge agreed to adjourn the possession proceedings so that Ms I could bring a complaint to the Financial Ombudsman Service. Ms I complains that Elderbridge hasn’t treated her fairly. She thinks that it has wrongly calculated the loan balance, as she says she only borrowed £35,000 but Elderbridge says she borrowed more than that. She says she’s tried to make repayments and offered what she could afford. She says she’s repaid more than she borrowed, and there is only £5,000 left – but Elderbridge says she also owes over £40,000 in interest. She doesn’t think it’s fair that Elderbridge won’t agree a payment arrangement and is threatening to repossess the property. She wants Elderbridge to agree a solution that will allow her to repay the loan over time in an affordable way. Our investigator said that part of Ms I’s complaint was brought out of time. She’d first complained to Elderbridge in 2021, and Elderbridge responded to her complaint on 29 June 2021, giving her six months to complain to us if she wasn’t happy. Ms I didn’t do that, but instead complained to Elderbridge again, and Elderbridge issued further final responses on 29 December 2021 and 11 May 2022. As Ms I first contacted us in June 2022, our investigator said that matters covered in the June 2021 response were out of time, and he would only consider the second and third complaint, from December 2021 and May 2022. This meant that our investigator only looked at whether it was fair for Elderbridge to threaten repossession proceedings rather than agree a payment arrangement in 2022, and whether Elderbridge had acted appropriately or in a threatening manner, causing Ms I unnecessary stress. The investigator didn’t think Elderbridge had acted unfairly. He noted that F and then Elderbridge had removed interest from the main loan balance to allow Ms I to repay the capital more quickly. But because she’d not made any payments between 2008 and 2017, the loan balance had not reduced as it should have done and extra interest had been incurred. He noted that the term of the loan had ended in 2013. He didn’t think it was unreasonable for Elderbridge to take action to recover the outstanding balance, especially as it wasn’t affordable for Ms I to make payments to clear it within a reasonable time. Ms I didn’t agree, and asked for an ombudsman to review her complaint. 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.

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I agree with our investigator that we can only consider part of Ms I’s complaint. The time limits which apply to the Financial Ombudsman Service say that a complaint must be made within six months of the date Elderbridge issued its final response. If a complaint is made outside the limit we cannot consider it – unless Elderbridge consents (which it hasn’t), or unless there are exceptional circumstances which explain why the complaint couldn’t have been made in time. In this case, Elderbridge replied to Ms I’s first complaint on 29 June 2021, but she didn’t contact us until June 2022 – so this complaint is out of time. I’ve not seen anything that would amount to exceptional circumstances which explain why Ms I couldn’t have complained sooner than she did. I can see from the loan agreement that Ms I borrowed £37,000 – not £35,000 – and that she also borrowed £7,374.10 to pay a payment protection insurance (PPI) premium. This made the total loan balance £44,374.10, with a monthly payment of £570.59. It seems from Elderbridge’s records that Ms I complained to F that the PPI had been mis-sold in 2014. I don’t know the outcome of that complaint, or whether any redress was paid to Ms I direct. But none was added to the loan balance. I’m therefore satisfied that Elderbridge has not mis-calculated the loan balance, or used an incorrect initial loan amount, in setting the amount it’s asked Ms I to repay. Ms I took this loan out in 2006, and it was due to be repaid in 2013. Unfortunately, Ms I fell into financial difficulties from an early stage, and a possession order was first obtained in 2008. Around the same time, F took the decision to suspend interest on the loan account. This doesn’t mean it stopped charging interest altogether – rather, it means that it removed interest from the main loan balance and kept it in a separate sub-account. This had two effects. Firstly, it meant that from then on, any payments Ms I made would be used solely to reduce the capital – which meant that, if she made payments, her balance would reduce more quickly and she’d be charged less interest overall. And secondly, it meant that from then on Ms I would only be charged simple not compound interest, again reducing the amount of interest she’d have to pay overall. This was therefore a form of forbearance designed to assist Ms I – by helping her get the loan back on track, and reducing the impact of the payments she’d missed. However, Ms I was still not able to keep up with the loan, and didn’t make any payments at all between September 2008 and November 2017. Nor was she in contact with either F or Elderbridge, until Elderbridge re-established contact in late 2017. But by then the loan term had ended four years earlier. In late 2017, Elderbridge agreed not to take possession action in return for Ms I agreeing to pay £1,000 per month – on the basis that if she kept paying that amount, the loan balance would be cleared in around six years. Ms I continued to pay £1,000 a month for the next few years, but from early 2020 has not been able to pay that amount. She’s paid £500 and then £300 per month. Elderbridge wasn’t happy with this, on the basis that it would take much longer to clear the loan balance. Even though it stopped charging interest at all in early 2021, it would take a further ten years for the loan to be repaid at £300 per month – meaning that it wouldn’t be paid off until almost 20 years after the term ended. In all the circumstances, I think Elderbridge has acted fairly in this case, and shown reasonable forbearance. Even though the loan term ended in 2013, and Ms I didn’t make any payments at all for many years, it has tried to work with Ms I to help her find a way to

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repay. It agreed an arrangement which would allow the loan to be repaid within a reasonable time. When Ms I was no longer able to keep to that arrangement, it looked at her financial situation to see what she could afford to pay and whether an arrangement to repay could be reached. Following F’s decision to suppress interest in 2008, Elderbridge first maintained that arrangement, and then has stopped charging interest altogether since 2021. I do understand that Ms I is in a very difficult situation. She’s struggling to make payments she can’t afford, and there is still a substantial balance outstanding. At the same time, however, Elderbridge is entitled to have the loan balance repaid within a reasonable time, and it has taken steps to assist Ms I to do so. I don’t think it can reasonably be expected to wait for twenty years or more after the loan term ended for it to be repaid. While I don’t doubt that this is very disappointing for Ms I, I think that if she’s not able to repay the loan it’s reasonable for Elderbridge to be contemplating taking further action. However, Ms I may want to take independent debt advice to see whether there are any other options open to her, and if she is able to make proposals for repayment, I would expect Elderbridge to give them fair consideration – which may include giving Ms I reasonable time to raise the funds to repay through re-financing or sale of the property, if those options are open to her. My final decision For the reasons I’ve given, my final decision is that I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Ms I to accept or reject my decision before 13 June 2023. Simon Pugh Ombudsman

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