The High Court has recently expressed concern that distressed borrowers are being duped into paying money to the anonymous promoters of schemes, which purport to protect them from enforcement by lenders but are actually 'utterly misguided and spurious'.
There are a number of schemes being promoted at the moment that supposedly protect borrowers in arrears from enforcement by their lender.
How these schemes supposedly work varies: in some, the mortgage is purportedly transferred to a third party, in others the borrower's interest in the property is purportedly transferred to a trust.
The common thread is that none of these schemes that have come before the courts work, except perhaps to delay enforcement and increase legal costs.
However, a second and more concerning feature of some of these schemes is that money is paid to the people who promote the scheme, sometimes on a monthly basis.
KBC Bank Ireland plc v Flynn
One such scheme, the Peoples Mortgage Protection Vehicle ("PMPV"), recently came to the attention of the High Court in KBC Bank Ireland -v- Flynn.1
The scheme, in this instance, involved the borrowers purportedly transferring their mortgage to the PMPV. Mr Flynn informed the judge that he had been making mortgage payments to the PMPV.
The Court held that:
"The suggestion that the defendants could somehow defeat the claim of the plaintiff bank by assigning their interest in the mortgage or indeed property in question to a third party is utterly misguided and spurious."
"It is a matter of considerable concern that Mr Flynn, and perhaps others like him, are being duped by anonymous parties into paying money to them on the basis of so-called legal advice about their rights and entitlements."
This judgment should assist lenders in dealing with some of the spurious claims being made in defence of proceedings.
More broadly, it is to be hoped that it is also sufficient to enable regulators to take decisive action to appropriately sanction and eradicate such schemes, which would benefit both lenders and borrowers.
1High Court, unreported, Noonan J., 13 February 2017.
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