New Private Eye piece on Horizon

This fortnight's Private Eye (issue 1375, above) contains a very interesting article about the leaked internal document by Second Sight, the firm commissioned by the Post Office to investigate problems surrounding the Horizon computer system.

For the background to this scandal, here's this blog's primer.

I'll put the full Private Eye article up here when this fortnight's magazine is no longer current. If you want to read it now, I urge you to go and buy a copy of Private Eye at your local newsagent.

UPDATE: Private Eye have posted the magazine article on their own website. You can read it here for free right now.

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The SAM scandal - BBC Inside Out South

The above investigation into Shared Appreciation Mortgages was broadcast by BBC Inside Out South on 8 September 2014.

It came about because of an email my colleagues received in March this year from a Mr Brian Dawtrey. Mr Dawtrey told us about a financial product he had taken out which is slowly ruining him.

It's known as a Shared Appreciation Mortgage or SAM. These products were sold in their thousands by Barclays and the Bank of Scotland between 1996 and 1998. Nearly half are still active. 

The deal is simple. The bank gives you 25% of the value of your property as an interest-free cash loan, in return for 75% of your home's future increase in value. The only way to redeem the mortgage is to sell the house.

For example: 

The owner of a £200,000 house in 1998 would sign up to a SAM and be given £50,000 cash. 
If that house were sold in 2014 for £600,000, the owner would be required to hand over £350,000 to redeem the mortgage. 

So:

Sale price: £600,000
House value when SAM taken out: £200,000
Increase in value: £400,000
75% of increase in value: £300,000
Original loan: £50,000
Total repayable: £350,000 (a return for the bank of 600%)

SAMs are equity-release products. They were offered to mainly retired people who had paid off their mortgages and were looking to release some of the value (equity) tied up up in their home.

Brian Dawtrey's case

Mr Dawtrey is 85 and lives near Lymington in Hampshire. He is quite upfront about the way he was sold his Shared Appreciation Mortgage. He was a financial naïf. He needed cash to live on, and when he heard the Bank of Scotland was handing out interest-free loans, he wanted a piece of the action.

To put this in context, Mr Dawtrey spent the first ten years of his career as a tenant farmer in Norfolk, living off the land in austerity Britain. In 1960 he took a job as part of the British overseas aid programme, moving his family to Africa to help newly-independent governments build houses, agricultural systems and transport infrastructure.

As a British guest worker of an impoverished foreign government he was never given a pension, and no one told him that if he didn't pay his National Insurance stamps back home he might be in trouble. 

In the 1970s Brian had the good sense to buy a bungalow in the New Forest with his savings. When he retired there in 1985 he found (because of his non-stamp-paying years overseas) he only qualified for a reduced state pension. 

Times got tight. In the nineties a neighbour told him about these interest-free loans the Bank of Scotland were throwing about, so he applied directly, without speaking to a lawyer or financial advisor. All the paperwork was done, and in 1998 he found himself the recipient of £35,000 cash from the Bank of Scotland on a home valued at £140,000. He had let a trojan horse into his home.

As Mr Dawtrey tells us in the film above: "a property value... is just something in the air, but giving us cash to live on, was a great idea."

Now he sings a different song. His property is worth £450,000. If he sells it tomorrow he will have to give Bank of Scotland £267,500. A return for the bank of 664%.

You may lose sympathy for Mr Dawtrey at this point, and on the face of it, that's fair enough. Many of those who took out SAMs consider themselves fools. I've seen and spoken to SAM holders in turmoil at their own stupidity, constantly beating themselves up about a financial decision taken by them or their partner nearly two decades ago, which has now ruined their lives.

You might think banks are perfectly entitled to take whatever they can, legally. Banks exist to make money for their shareholders, customers are there to be fleeced. Right? No one forced Mr Dawtrey, or the thousands like him, to grab the interest-free carrot dangling in front of them. It was their own greed. 

Well, yes, but... does that make it okay?

Trust

"They were toxic. They were poisonous. They should never have been issued." 
Julian Lewis, Brian Dawtrey's MP

Mr Dawtrey was 69 years old when he took out his SAM. It seems hard to believe now, but banks in the eighties and nineties had a rock solid reputation for safety, probity and looking after their customers' interests as much as their own. People trusted them. 

Older people, who may have known their bank manager for years, trusted them even more. The idea a bank would sell a product which could slowly and deliberately eat away your children's inheritance was unthinkable. A bank was supposed to be interested in looking after your assets for your mutual benefit, not stripping them from you.

"It usury. It's a form of lending which is exploiting the ignorance of the customer."
 Ian Fraser, financial journalist.

Regulation

SAMs are perfectly legal. They could still be sold today. But the rules governing the way they could be sold are very different. 

In the nineties, mortgages were not really regulated. There was some loose oversight. Banks operated under the (voluntary) Banking Code and mortgage lenders operated under the (voluntary) Mortgage Lenders Code. The FSA (now the FCA), didn't regulate mortgages until 2004.

As a condition of operating under the Banking Code, banks had to sign up to the Banking Ombudsman, which has the statutory power to tell the bank to fix things, if it decided a bank had broken the Code, made an error or acted unfairly.

In the case of Shared Appreciation Mortgages, although Barclays and Bank of Scotland marketed them under their usual company branding, they set up separate companies to administer and issue the mortgages. These separate companies weren't signatories to the banking code, so the Banking Ombudsman had no powers to even investigate whether customer complaints about SAMs were valid. Essentially Barclays and the Bank of Scotland hung their customers out to dry.

The legislators

After getting nowhere with the Banking Ombudsman many complainants went to their MPs. It seems between 2002 and 2008 a fair head of steam was built up at parliament. The Shared Appreciation Mortgage Action Group (SAMAG) was created by SAM holders. They joined forces with the Struggle Against Financial Exploitation (SAFE) group to work with members of parliament to see what could be done. 

I've seen some excellent correspondence from MPs to Barclays and Bank of Scotland spelling out exactly how unfair they think these SAM products are and demanding to know what the banks were going to do about it.

The campaign did get some movement in the middle 2000s as pressure on Barclays led them to set up a hardship scheme. This either allowed customers a grant to make good problems with their home (eg buy a new roof) or it allowed them a special loan to buy a new property if they needed to downsize or move into special accommodation.

The former provision is fairly straightforward. If the roof is falling in and you need some money to fix it, Barclays will give you the cash on condition you never ask for anything again. 

After all, as they are slowly taking over the ownership of your home, they need to get a decent price for it when it is sold. Paying the customer to keep their appreciating asset in good nick is good business. I spoke to one very bitter SAM holder who refused to use the Barclays scheme. She said "I should just let the place rot. Why should I keep the place looking nice the way I do, just so they can take the benefit of the hard work I've put into maintaining my home all these years?"

The latter provision of the Barclays SAM Hardship Scheme is a little more complicated. If you are getting on - perhaps unable to climb the stairs, or prone to falling - you may need to move into more suitable housing. 

If your home is worth £500,000 and Barclays are due to take £300,000 of that when your property is sold, you are going to be left with £200,000 to buy a new property. This may not be enough. The Barclays hardship scheme provides interest-free loans, repayable on the sale of your new property (most likely when you die) to make up the difference between the cash you have and the cash you need, up to 50% of the value of the new property.

In this way you are still shafted by the SAM, but at least you can maintain your quality of life by moving into suitable accommodation.

Whilst Barclays was recognising there was a serious problem with SAMs, Bank of Scotland (which had mutated into HBOS) was at the very height of its  "dangerously out-of-control and riddled with fraud and alleged criminality" phase. 

It is perhaps unsurprising, therefore, that the chancers in charge of this soon-to-be-taxpayer-supported enterprise felt able to ignore MPs and the anti-SAM campaign and refuse to set up or join any formal hardship scheme. 

One of the Bank of Scotland's PR people did tell me recently that they assess every hardship case on its merits. If a SAM holder contacts them in need, BoS may offer them a special mortgage or "be able to provide them with a grant for a stairlift."

The lawyers

Unable to win redress via the regulators or using political pressure, some of the campaigners took a legal route, which ended disastrously.

One firm of solicitors believed the contracts customers signed when taking out their SAMs could be considered fundamentally unfair. And unfair contracts are unlawful under the Consumer Credit Act. 

If I ask you to sign a deal which has very little potential downside for me, but which has a huge amount of potential downside to you, it doesn't actually matter if you willingly sign it. If the contract is unfair and can be proved to be so, you can get out of it.

In 2009, anti-SAM campaigners raised £1.5m in legal fees for a class action. They took it to court, fighting the banks' lawyers who felt their clients had no case to answer. In 2010, a judge agreed the case could be heard. The banks appealed that decision. A different judge partially sided with them and agreed to shift the goalposts a bit. The campaign lawyers had to regroup and think up a new strategy. 

Before they could do this, the £1.5m ran out, so the campaign lawyers had to go back to the litigants and ask for more money. The campaigners couldn't do it. They withdrew their case and were hit with the banks' costs, which ran to several million pounds.

To avoid paying the banks' costs, a deal was struck. The litigants had to sign stringent gagging orders which stopped them ever complaining about their SAM to anyone ever again. 

At a stroke the campaign collapsed, everyone was several thousand pounds poorer and the banks could continue their legal right to slowly take peoples' homes away from them. 

But at least every lawyer involved got paid.

Why this affects you

"It's a fundamentally unfair product." Barry Taylor, SAM victim's son.

Edna Robson lives in Chelmsford. She also features in the film embedded in this blog post. In 1998 she took out a £15,000 SAM on her house. Two years ago Edna's dementia got so bad she needed to go into a care home. With the help of her son, Barry, Edna sold her house for £183,000. Because Edna had a SAM, Barclays helped themselves to more than half of it, leaving Edna with £87,000 in savings. 

Since 2012 Edna has been paying £640 a week from her savings to fund her care. Now her savings have fallen below the means-testing threshold, the state will pick up the bill. So taxpayers will start paying sooner for Edna's care because the money she would otherwise use has gone to Barclays shareholders. There will be many more cases like Edna's.

Conclusions

I put it to both Barclays and the Bank of Scotland that by selling Shared Appreciation Mortgages in the way they did, they broke the Banking Code, specifically the sections noting a bank will:

a) “help you understand the financial implications of a mortgage”
b) “ensure all services and products comply with this code”
c) “act fairly and reasonably in all our dealings with you”

With regards to a), I can't help thinking if any customer were aware of the real financial implications of a SAM, they wouldn't go near one.

On the subject of b) - the product was being marketed by Barclays and Bank of Scotland (signatories to the Banking Code) but administered and issued by companies (eg BoSSAM No.1) which were not signatories to the Banking Code. That seems to be a direct breach of the code.

On the subject of c), one of the defences the banks fall back on when discussing SAMs is that they were shouldering a risk when issuing these products. If house prices went down they would lose money. Also, they say, no-one knew house prices were going to go up in the way they did. I would like to see their modelling on that.

Either they knew the risks to the customer (which queries how fair and reasonable their dealings were at the time), or they didn't. If the latter is the case, and they are now making profits in excess of expectations (ie excessive profits), wouldn't it be fair and reasonable to cap, time-expire or, heaven forfend, cancel their customers' SAM mortgage contracts?

I got this from Bank of Scotland:

"Bank of Scotland acted in line with normal codes of practice in place at the time when SAMs was launched.

It is worth noting that in the fourth paragraph of the SAM application form it reads "In return for a fixed interest rate for life you agree to the outset to surrender a known percentage of any future increase in the value of your home. Consequently, we strongly recommend that you consult your own Financial Adviser or Solicitor before making an application to ensure that SAM is suitable for you.

Customers then sign the application form declaring "I / We confirm we have received and read a copy of BOSSAM 5 brochure and fully understand the nature of the product." There is therefore not any need for the bank to help a customer "understand the financial implications of [the SAM] mortgage" as they have declared they already do."

And I got this from Barclays:

"Barclays recognised at the time it was offering SAMs that they would not be suitable for everyone, and we therefore ensured that:
1.       The mortgage seller was required to explain the mortgage to the customer and evidence this by completing a Confirmation of Discussion Form, a copy of which was given to the customer.
2.       Confirmation was required from the customer’s solicitor/legal advisor that they had obtained independent legal advice about the terms of the mortgage.
This complied with and exceeded our obligations under the Mortgage Code.
Barclays took extensive legal advice and Counsel relating to all aspects of the SAM scheme, including the contents of the brochure promoting it.  Against this background, we are satisfied that the brochure was accurate and did not result in any mis-selling of this product.” 

Both banks also tell me all their SAMs have been securitised and sold on. They cannot simply release people from their contracts as the future mortgage redemption proceeds have been bundled up into "securities" which are owned and traded by multiple investors on the financial markets.

Conclusions

Many SAM customers are decent people. They worked hard all their lives and put what they earned into their homes. They were never rich. Rich people do not need to raise cash by releasing the equity in their property at usurious rates.

Do these people deserve to be in this situation? Would you turn around to Brian Dawtrey, shrug your shoulders and say "them's the breaks, old man!"

What if you end up paying for Brian's care because the Bank of Scotland have taken the lion's share of his only real asset? 

Nearly 12,000 SAMs were sold between 1996 and 1998 by Barclays and Bank of Scotland, and nearly 6,000 are still active. Many customers are now in their eighties and nineties. Some are consumed by the stress these products have caused. Far from being over, this is a live issue.

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Initial Complaint Review and Mediation Scheme Briefing Reports Part 1 and 2

A lot of people are landing on my blog today, I suspect as a result of a piece which went out on Radio 4's PM at 5.50pm.

I have seen the report Dan Johnson was talking about and I am putting together a comprehensive update.

I would urge any disaffected Subpostmasters reading this to get in touch NOW. As far as I understand it, part of the process of mediation is that you will be required to sign a gagging order which stops you, under threat of being sued, from talking to anyone, especially journalists, about any settlement or agreement you make with the Post Office.

What I'm not clear on is whether the gagging order is signed before any settlement is agreed, or whether it's signed as part of the settlement. I can't imagine it's the former, but I did hear someone suggest it was.

Even assuming it's only signed on agreement of settlement, it's not ideal. You'll (hopefully) get some money back, but you won't be able to protest your innocence or tell the story of what happened to you to anyone, ever again.

I might have got this completely wrong, and there may be no gagging clause at all attached to the cases being mediated. People are being very guarded at the moment.

But whilst you are free to give me information about your situation now, it seems like there is a likelihood you won't once your case has been mediated. Which means there is a grave danger this story won't get properly told.

If your case isn't one of the ones up for mediation but you think you have a legitimate grievance, do get in touch anyway - I'd like to hear from you. I am also interested in hearing from anyone who has witnessed fraud or theft via Horizon's weaknesses.

Everything anyone tells me will be treated in the strictest confidence.

Follow me on twitter (@nickwallis), ask me to follow you and we can exchange details privately, or come and find me on facebook (facebook.com/nickjwallis).

Car thieves and thugs: caught on camera - Wed 30 July

Episode 3 tx card. Cut out and keep.

I think the first two episodes of this series have been pretty good, but this one is the best so far. The opening sequence is fairly intense and it goes on from there. Please watch it if you can, either as it goes out on Wed 30 July at 9pm on Channel 5, or on catch up.

Here's a gallery of the delights awaiting you:

Now, come on, someone's bound to get hurt.

Again, inadvisable.

Airborne thermal imaging camera 

Argument with a lampost

'Copter!

Cuffs!

Chips!

Oh dear.

The series is taking a break for the summer, but there are at least another five episodes coming your way in the autumn.

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Top Ten Albums: Henry's Dream

You lookin' at me?

Nick Cave is a cussed chap. There’s a film about him coming out next month which promises to be as close to its subject as Frank was to Chris Sievey, and all the better for it.

I think Henry’s Dream is Nick Cave’s best album. He, apparently, can’t stand it. Something to do with a falling out with the producer.

I was always wary of Nick Cave. There he was, at the JHQ Rheindahlen RAF record library, staring out at me from the cover of Your Funeral, My Trial and Kicking Against the Pricks, looking like he was perfectly willing to put a stack-heeled boot into my white, flabby belly for having the temerity to like, or perhaps, not like his music.

No, it said. Steer well clear. I did, until I read a review of Tender Prey, the album which supposedly announced his arrival as a major artist. Melody Maker, my bible, said it was beyond good, so I bought it. Then I bought his next album The Good Son, a blessed relief after the intensity of Tender Prey. Then came Henry’s Dream.

I wasn’t waiting on the release date of a new Nick Cave new album, but I knew something was due, and when I walked into the Andover Our Price to see a 12” single adorned with a live shot of that unmistakable mullet I was delighted. It was called I had a Dream, Joe. “I hope this is good”, I remember thinking, “I really hope this is good”.

It is. For any song to have the chance of becoming a classic, the music has to be right. Only when the setting is approaching brilliance do we start to pick apart the words, to see if the artist actually has anything to say. Terrible lyrics won’t necessarily limit the progress of a song, but good ones can help elevate it to a different level.

As a lyricist Nick Cave is in the same class as Shane MacGowan, Paul Simon and Alex Turner. He’s built a career mining a rich seam of violent, bible-belt gothic, and on this song everything comes together.

The title sets out the conceit - we are going to hear an interpretation of Mary’s first words to Joseph on waking from her dream of immaculate conception. The idea is arresting enough, but when filtered through Cave’s knack for disorientating horror, it becomes something new entirely. These are the opening lines:

I had a Dream, Joe - you were standing 

In the middle of an open road.

I had a Dream, Joe - your hands were raised up to the sky 

And your mouth was covered in foam.

I had a Dream, Joe - a shadowy Jesus, 

He flitted from a-tree to tree.

I had a Dream, Joe - a society of whores 

Stuck needles in an image of me.

I had a Dream, Joe - it was autumn-time

And thickly fell the leaves.

And in that Dream, Joe, a pimp in a seersucker suit

Sucked a toothpick, and pointed his finger at me!

Now, that’s the way to start a song. The open road, the mad raving, the unnerving presence of a witch-like Christ and the dramatic gesture at the climax all combine to paint a lurid scar across your imagination. Echoes of Martin Luther King in the phrasing, too. This is not your average pop record.

As soon as I could, I got my hands on the album.

The cover of Henry's Dream is a painting of an orange-red sky behind a billboard. The billboard features the album’s title and an image of Mr Cave in mid-West preacher get-up. He wears his thumbs on his lapels and a brooding expression. 

The picture transports you to a fictionalised version of America's dustbowl. You are drifting into someone else’s mental landscape, looking up at a sign which can be read as as a statement of authority and a warning.

The journey begins with Papa Won’t Leave You Henry - sample lyric:

I entered through, the curtain hissed

Into the house with its blood-red bowels

Where wet-lipped women with greasy fists

Crawled the ceilings and the walls

and ends with Jack the Ripper - sample lyric:

I got a woman - she strikes me down with a fist of lead
I got a woman - she strikes me down with a fist of lead
We bed in a bucket of butcher's knives
I awake with a hatchet hanging over my head

in between we get love-in-the-time-of-the-apocalypse courtesy of Straight to You - sample lyric:

Gone are the days of rainbows
Gone are the nights of swinging from the stars
For the sea will swallow up the mountains
And the sky will throw thunderbolts and sparks
Straight at you, but I'll come a-running
Straight to you, but I'll come a-running
One more time...

an outsider love story - The Loom of the Land - sample lyric:

It was the dirty end of winter
Along the loom of the land
And I walked with sweet Sally
Hand upon hand
And the wind it bit bitter 
For a boy of no means
With no shoes on his feet
And a knife in his jeans

the song of a self-pitying as yet un-caught murderer - When I First Came to Town - sample lyric:

Suspicion and dark murmurs surround me
Everywhere I go, they confound me
As though the blood on my hands is there
For every citizen, here to see

and the best drinking song ever - O Brother, My Cup is Empty - sample lyric:

I've been sliding down on rainbows
I've been swinging from the stars
Now this wretch in beggar's clothing
Bangs his cup across the bars
Look, this cup of mine is empty!
Seems I've misplaced my desires
Seems I'm sweeping up the ashes
Of all my former fires
So brother, be a brother
And fill this tiny cup of mine
And please, sir, make it whiskey
I have no head for wine

The only duff track is Christina the Astonishing, about a 12th Century saint, which is performed almost as plainsong.

The rest of the album is outstanding. It features an interchangeable cast of murderers, drunks and lowlifes - overlapping lyrical obsessions and imagery delivered with deranged passion. The Bad Seeds' sound around this time was described as an unholy racket. It is.

I cannot recommend this record highly enough. A shame the person who wrote it disagrees.

*********************

Other top ten albums added so far:

The Waterboys - This is the Sea
Floodland - Sisters of Mercy
Duran Duran - Rio

The rationale for doing this. 
Further rationale at the bottom of the This is the Sea entry.

Criminals Caught on Camera Series 2 is go

The first episode of the second series of Criminals: Caught on Camera went out last night. I'm thrilled to tell you it got a sizeable audience which has put the team (who've been working on it since the beginning of the year) in a very good mood.

If you missed it, it's up here on Demand 5, along with all the programmes from series one, which is nice.

If you'd rather just be put off ever buying a street vendor's hot dog ever again, have a watch of this:



If you'd just rather have a look at some screengrabs, fill your boots:

Favourite shot in the whole programme

Good lens flare

Bit post-watershed, this one

Well, exactly.

Friday night fun

Very unwise (see right of picture)

If you want to see the stories behind the images above, do give it a try on Demand 5.

Finally I've been told series one has been sold to New Zealand, Sweden, Poland, and Finland among other countries. And in NZ we have the evidence they're actually broadcasting it...

World domination is, admittedly, some way off, but it's a start.

Gangs and Guns: Caught on Camera - new series!

Hi there. 

Just to let you know the first show of the second series of Criminals: Caught on Camera will go out for the first time on Channel 5 at 9pm this Thursday 17 July - less than a week's time.

It's called Gangs and Guns: Caught on Camera and it's a one-off, focusing on London. The remainder of the series is in the process of being made. It's coming together slowly but surely, and the stuff I've seen so far has been excellent.

I was very proud of the first series and the ratings it got. I'm confident we've got the mix right for the second series. Fingers crossed, you'll like it.

I'll try to get some publicity and screenshots up on this blog when they've been approved, but in the mean time I would be most grateful if you could tell your friends, set your PVRs or even sit down to watch live on Thursday 17 July at 9pm on Channel 5. I will be.

Thanks

Nick