Competition and choice in retail banking - Treasury Contents

Written evidence submitted by David Johnston


I write to draw your attention to a concerted attempt by the above two banks to use their dominant market position to drive small conveyancing firms out of the mortgage market and therefore to restrict consumer choice; presumably for their own financial advantage. Given Lloyds in particular is 41% owned by the taxpayer, is this Government Policy?

I am a solicitor with 30 years post qualification experience. In 1984, I set up my own firm Clifford Johnson and Co in south Manchester. I no longer own the firm but continue to work fir it as a consultant. I believe that the firm has a good reputation and has served its clients well over the past 26 years.

In particular, over this time, I have carried out conveyancing mortgage work for the above two organisation. The firm has been on panels for both organisations for 26 years. I am not aware of any complaints or concerns from either organisation over this period.

I was therefore surprised to receive letters from both organisations recently removing the firm for which I work from their conveyancing panels with immediate effect on the grounds of "low volume" of work. The decision is being appealed but, if confirmed, will have a serious effect on the firm's ability to carryout conveyancing business in the future and if other lenders follow a similar course may threaten the future viability of the firm itself. Lloyds also threaten to carry out a further cull in the not too distant future.

According to the Law Society, the rationale behind the decision is to reduce both organisations exposure to fraud and negligence. I would strongly questions this for two reasons. Firstly, I believe that small, tightly controlled, well run firms such as the form for which I work stand comparison with the large "conveyancing factories" on grounds of customer satisfaction; negligence; fraud prevention and complaints. Indeed, my personal experience of such large organisations over the years is that their services ranges from poor at best to appalling at worst. Such organisations pay large referral fees to, for example, mortgage brokers to get volume conveyancing business.

Secondly, I believe that the real reason for this decisions is to reshape the conveyancing market by driving out small providers to maximise the referral fee income which large conveyancing providers are prepared to pay for volume conveyancing business. This restricts consumer choice and, in my view, compromises the ability to provide truly independent advice. I have always been opposed to paying referral fees and I do not believe you can give properly independent advice if you receive them.

Lloyds action is particularly troubling as when they were created the then Government waived competition requirements to allow their creation do to the parlous state of HBOS. They now seek to use their dominant market position to reshape the conveyancing market to their long term financial advantage.

They are also 41% owned by the taxpayer. Is there decision in line with Government policy to promote small businesses?

I am also concerned that these letters have appeared at roughly the same time. Is this coincidence? Or has there been collusion between these organisations to attempt to shape the conveyancing market to their advantage?

In short, I believe this development will be bad for consumers as it will restrict consumer choice; compromise consumers ability to receive truly independent advice, and coupled with the other threats faced, hasten the closure of small, locally based high street firms, thereby restricting access to legal services.

I would be most grateful if you would consider these concerns and respond appropriately. If you need any more information please do not hesitate to contact me.

August 2010

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