British banks accused of lending-fee scam

GLASGOW, Scotland, Aug. 1 (UPI) -- British banks refunding $2 billion to customers for illegally inflating mortgage-exit fees are now inflating up-front fees, a consumer advocacy group alleged.

Moneyfacts of Norwich accused 10 banks, including ones tied to Britain's biggest mortgage lender, HBOS PLC, of attempting to recoup exit-fee reimbursements by increasing arrangement fees on new mortgages.

Arrangement fees, covering administration and a fee to reserve the money for mortgages, either increase the mortgage's size or reduce its value.

The banks accused in the scam include the Bank of Scotland, Birmingham Midshires and NatWest Mortgage Services, The (Glasgow) Herald reported.

The Bank of Ireland led the way on higher fees, increasing its arrangement fees by up to $2,000, the newspaper said.

"If it is the case that some lenders are increasing arrangement fees to offset the loss of exit fees then the spotlight will remain on those companies," Parliament Treasury Select Committee Chairman John McFall told the newspaper.

An HBOS spokesman said increased arrangement charges were not comparable to exit fees because they were geared toward business customers.