Southf.>a·n Pacific Mol"tgagf.> Limitf.>d

(FRN 302027)

APPLICATION TO REQUEST THAT REQUIREMENTS ARE IMPOSED ON
SOUTHERN PACIFIC MORTGAGE LIMITED

To: Thf.> Financial Conduct Authol"ity

FAO: Ian Con way

Southem Pacific Mortgage Limited hereby applies. ptu-suant to Part 4A of the Financial
Services and Markets Act 2000. for the requirements set out in the attached document.

Signed: .. ... . .

Lee randon - Chief Executive
For and on behalf ofSouthem Pacific Mortgage Limited

Date: ....... 1-6. .... cf.~
... 'l.~t.'-i

South~l'D Padfk Mortgag~ Limit~d (FRN 302027)

R~quir~m~nts indud~d in th~ Firm's P~a·mission at th~ r~qu~st of th~ Firm und~a·

s~ction SSL of th~ Financial s~nic~s and Mark~ts Act 2000

Inn·oduction

1.
These Requirements come into effect iuunediately.

2.
The tenus used in these Requirements have the meanings ascribed to them in Alu1ex
A hereto and in the Authority's Handbook of rules and guidance. unless the context
otherwise requires.

3.
The Finn has applied to the Authority for these Requirements. The Authority has
consulted with the Prudential Regulation Authority and the Authority has accepted the
application.

4.
The Finn is an authorised person which imposed excesstve Arrears Fees on
Customers during the Material Time. either directly or through its third party
administrator and agent Acenden which was directed by the Finn to apply such
Arrears Fees in accordance with the Finn's arrears handling policy and tariffs.

5.
Customers who have been charged excessive Arrears Fees dm'ing the Material Tin1e
are entitled to be refimded the difference between what it was reasonable to charge
and what was actually charged. plus interest on that difference.

6.
Supervisors at the Authority identified significant concems with the Firm's mortgage
arrears handling and raised these concerns with the Firm. As a result. the Finn has
agreed to establish and operate a consumer redress scheme on a vohmtary basis.

7.
The method of calculating Redress in these Requirements takes into account:

7.1
the ammmt of monies the Finn is able to make available for the purposes of
Redress (which would not otherwise be a\\u00b7ailable readily or at all):

7.2
the large ntll1lber of Customers. being approximately 17.271. who were
subjected to Arrears Fees at the Material Time:

7.3
the cost. difficulty and time it would take to investigate each case individually.
meaning that it would in this matter be appropriate to adopt a proxy for an
assessment of what reasonable charges would have been at the Material Tin1e:

7.4
representations by the Firm to the Authority that the payments and credits set
out below are a fair reflection of the actual loss suffered by Customers in
respect of the Arrears Fees at the Material Time.

8.
The Finn acknowledges that this is a 1mique solution to tllis pat1icular case. Notlling
in these Requirements shall be regarded as establislling a precedent for the
Authority's approach in the event of sinlilar matters or issues arising in respect of
other aspects of the Finn's business.

9.
The Firm will establish and operate the Scheme jointly with Preferred Mortgages
Linlited (FRN 304343): but notlling in these Requirements imposes any obligation on
the Fim1 to pay Redress 1mder the Scheme in respect of any Mortgage to wllich it is
not a party.

Rt>quinmt>nts

10.
Under sections 55L and 404F(7) ofFSMA. the following requirements are included in
the Fim1's Pemlission:

10.1
the Firm must establish and operate the Scheme (with the assistance of
Acenden if the Firm so wishes). 1mder wllich it. either directly or through
Acenden. will deal with matters falling witllin the Subject Matter of the
Scheme. by:

1 0.1.1
making a detenuination under the Scheme, by identifying and
detemlining the Redress due to Customers. no later than 8 July 2015:

1 0.1 .2
paying Redress to Customers by making payments. setting off against
sums otherwise due from the Customers to the Firm or not recovering
or seeking to recover the amotmt that would be payable in Redress if
there were no shortfall. as required by the Scheme. no later than 31
October 2015 unless paragraphs 14 and 15 apply;

1 0.1.3
taking such other action as is required under the Scheme: and

10.2
Scheme Complaints are to be dealt with by the Ombudsman as described in
Annex B. on the basis that the Scheme corresponds to or is similar to a
cons1m1er redress scheme under section 404 of FSMA and such complaints fall
to be dealt with (or have been dealt with) 1mder the Scheme (unless the Film
and Customer agree on or after 1 July 2015 that the Scheme Complaint should
not be dealt with by the Ombudsman in accordance with the Scheme).

Subjt>d mattt>r and dm·ation of Scht>mt>

11 .
The Scheme applies to the level of Anears Fees which the Finn. or on its behalf and
at its direction Acenden. applied during the Material Tin1e on Customers in respect of
and in cotmection with Mortgages. More particularly. the Scheme applies to the
Subject Matter of the Scheme. The imposition of the Arrears Fees fom1ed part of the
Finn's regulated mortgage activities since 31 October 2004 inclusive.

12.
The Scheme starts on 1 July 2015 and has no end date.

Customf'r idf'ntifi ... ation

13.
TI1e Finn will carry out an investigation to identify each Customer by no later than 8
July 2015.

14.
TI1e Firm will use all reasonable endea,·ours to trace Fom1er Customers for whom no
ctm·ent contact details are held. These endeaYoms will include a fl.tll reYiew of the
Finn's and Acenden·s records and any other releYant records that the Firm properly
has access to:
matching closed accotmt records with any held elsewhere in the

Lelmtans group of companies and in relation to which the Fim1 may properly seek or
obtain access or information: and using an extemal tracing agency to access key
external data bases. If by 31 October 2015 such reasonable endeavoms haYe failed to
result in such Fom1er Customers being traced then. subject to paragraph 15 below. the
Firm will be tmder no fi.trther obligation in relation to the Scheme in respect of such
Fom1er Customers.

15.
If the Finn subsequently makes contact with or is contacted by a Former Customer
who was not traced under paragraph 14- for example. if the Finn subsequently leams
of or obtains the Fom1er Customer's contact details- the Finn will then be botmd to
apply the Scheme to that Fonner Customer (insofru· as and to the extent that the
Scheme applies): and will pay or credit any Redress due to that Fom1er Customer
within 8 week~ of such contact. and (subject to paragraph 28) paragraph 27
(explanatory letter) or paragraph 33 (Redress Detemlination) will apply as
appropriate.

Redress detemrination

16.
The Finn agrees to determine. by no later than 8 July 2015. the Redress payable to. or
otherwise due to the credit of. Existing Customers and Fom1er Customers by adding:

16.1
the difference between the AMF actually charged and £65. for each month
dtuing the period from 1 January 2010 to 2 April2011 that the AMF exceeded
£65. plus 8% sin1ple interest per atmtml on such difference. by applying the
following formula for each excessiYe fee payment:

(AMF - £65) + ((AMF - £65) x 0.08 x Nmuber of Days from the date on
which the fee was paid or applied tmtil the date of the refi.md/365):

16.2
the difference between the LMF actually charged and £80. for each month
during the period 1 Januaty 2009 to 31 August 2012 (inclusi,·e) that the LMF
exceeded £80. plus 8% simple interest per annum on such difference. by
applying the following fommla for each releYant excessive fee payment:

(LMF- £80) + ((LMF- £80) x 0.08 x N1m1ber of Days fi·om the date on which
the fee was paid or applied until the date of the refi.md/365):

16.3
the difference between the RMF actually charged and:

16.3.1 £500. for each month during 2009 where the RMF exceeded £500.

16.3.2
£525. for each month from January 2010 - April 2011 where the
RMF exceeded £525. and

16.3 .3
£546. for each month from April 2011 - August 2012 where the RMF
exceeded £546.

plus 8% simple interest per ammm on any such difference.

by applying the following fonnulae for each excessive fee payment:

(i)
From 1 January 2009 to 31 December 2009:

(R.MF- £500) + ((RMF- £500) x 0.08 x Nmnber of Days from the date
on which the fee was paid or applied tmtil the date of the refund/365):

(ii)
From 1 January 2010 to 3 April2011:

(RMF - £525) + ((RMF - £525) x 0.08 x Number of Days from the
date on which the fee was paid or applied tmtil the date of the
refi.md/365):

(iii)
From4 April2011 to 31 August 2012:

(R.MF- £546) + ((RMF- £546) x 0.08 x Number of Days from the date
on which the fee was paid or applied mttil the date of the refi.md/365).

Fonner Customers and Shortfall Customers

17.
Where a Former Customer has repaid in full all amotmts due in respect of the
Customer's Mortgage. the Redress shall be paid to the Customer by electronic transfer
directly into the Customer's bank accollllt or. ·where this is not possible, by cheque.

18.
Where in relation to a Shortfall Customer the amotmt of Redress exceeds the amotmt
of the releYant shortfalL the balance of the Redress shall be paid to the Fonner
Customer by electronic transfer directly into the Customer's bank accollllt or. where
tlus is not possible. by cheque.

19.
Tins paragraph applies where in relation to a Shortfall Customer:

19.1
the releYant shortfall exceeds the amotmt of Redress: and

19.2
the Firm takes any steps to reco\\u00b7er the rele\\u00b7ant shortfall from the Shortfall
Customer.

20.
The following proYisions apply to a Shortfall Customer to whom paragraph 19
applies:

20.1
The Finn tmconditionally and irrevocably agrees not to seek to recover or to
recover (in either case. on its own or d1rough a debt collection agent) an
amotmt equal to the amount of Redress less the Interest Component. For the
avoidance of doubt. where in relation to the Shortfall Customer the Firm has
appointed a debt collection agent to recover the relevant shortfall. the Finn
shall notify the agent of the revised shortfall amotlllt.

20.2
H the Customer proposes to repay d1e relevant shortfall (as adjusted in
accordance with paragraph 20.1). the Finn will, if the Customer so elects.
reduce the amow1t of the rele\\u00b7ant shortfall owed by that Customer by an
amollllt equivalent to d1e h1terest Component. save that interest will be
calculated from the date on which the relevant excessive fee payment was paid
or applied to the date on which the rele\"ant sh011fall is repaid by the Customer.

Existing Customers

21.
For Existing Customers. the Redress shall be applied in the following order:

21.1
first. against any outstanding Other Amollllts Due (if any): and

21.2
then. the balance will be refunded to the Customer.

22.
Tills means that where an Existing Customer has no outstanding Other Amollllts Due.
the Redress shall be paid to the Existing Customer by electronic transfer directly into
the Customer's bank accotmt or. where this is not possible. by cheque.

23.
Where an Existing Customer has outstanding Other Amotmts Due. the Redress shall
be first applied against the outstanding Other Amotmts Due. If and to the extent that
the Redress exceeds the outstanding Other Amotmts Due. the balance shall be paid to
the Existing Customer by cheque or by electronic transfer directly into a Customer's
bank accotmt.

Redress payments

24.
Before making any payments to a Customer by electronic transfer. the Firm must
verify that the bank accotmt details are correct.

25.
The Finn may arrange for a third party (such as Acenden) to facilitate the payment of
the Redress to Customers on its behalf. but paragraph 26 will still apply.

26.
The Finn will make all payments, credits and reductions pursuant to paragraphs 17 to
25 above on or before 31 October 2015. wlless paragraphs 14 and 15 apply.

ExplanatOI'Y lt>ttt>l' to auompany Rt>drt>ss

27.
Before or at the same time as the Finn pays Redress to a Customer, the Firm will send
an explanatory letter to the Customer in substantially the fonn of the appropriate
template letter attached at Atmex C. The explanatory letter will include the following:

27.1
a brief smnmacy ofthe Finn's obligations tmder the Scheme;

27.2
an explanation that the payment or credit (as the case may be) has been
calculated and made in accordance the Scheme.

28.
For the aYoidance of doubt. the Finn is not required to send an explanatory letter in
accordance with paragraph 27 in relation to a Shortfall Customer where the Firm has
detennined that the relevant shortfall exceeds the amotmt of Redress.

29.
If. after these Requirements come into effect. a Customer makes a Scheme Complaint
before an explanatory letter is sent, the Firm does not need to send an explanatory
letter. This is because. as set out below. the Firm will instead send the Customer a
Redress Detennination or final response.

Scht>mP Complaints about Mm1gagt>s madt> by a Customt>l' to tht> Fil·m m· Act>ndt>n

30.
From and including the date that these Requirements come into effect (being 1 July
2015). DISP l.l.llAR shall apply in respect of any Scheme Complaint made by a
Customer to the Finn or to Acenden.

31.
If the Firm recei,·es a Scheme Complaint. within five business days of receipt of the
complaint or within five business days of the date that these Requirements come into
effect. whicheYer is the later. the Finn will send the Customer a letter acknowledging
the complaint and then:

31.1
the Firm will send the Customer a Redress Detennination within 8 weeks of
receipt of the Scheme Complaint. if the Firm has not yet sent the complainant
an explanatory letter under paragraph 27: and paragraph 27 will cease to apply
in respect of that Customer:

31.2
the Firm will send the Customer a Redress Determination and written
comnuurication in accordance with paragraph 33 within 4 weeks of receipt of
the Scheme Complaint. if the complainant has already received an explanatory
letter tmder paragraph 27.

32.
If it has not already done so. the Finn will calculate Redress in accordance with
paragraph 16 abO\\u00b7e and will make payment or credit in the manner set out m
paragraphs 17 to 25 above at the same tin1e as it sends a Redress Determination.

33.
The written counmuucation from the Finn containing the Redress Detennination will
be in substantially the form of the appropriate template letter attached at Annex D.
The written conm1wtication from the Fitn1 containit1g the Redress Detenuit1ation will:

33.1
inform the complainant that the Finn has dealt with the subject matter of the
complaint in accordance with the Scheme:

33.2
set out the results of the Finn's determit1ation tmder the Scheme:

33.3
explain why the subject matter of the complaint falls within the Scheme:

33.4
enclose a copy of the Ombudsman's standard explanatory leaflet:

33.5
infom1 the complainant that. if the Customer remains dissatisfied with the
Finn· s response. he may refer his complaint to the Ombudsman. and subject to
paragraph 34. must do so within six months from the date of the subntission of
the complaint by including the following statement:

·'You havl" thl" I"ight to nfl"r your complaint to thl" Financial Ombudsman
Sl"rvicl", frl"l" of ch~n-gl" - but you must do so within six months of thl" datl"
of this ll"ttl"l'.

If you do not refer yow· complaint in time. the Ombudsman will not be able to
consider your complaint and so ·will only be able to do so in very limited
circwnstances. For example. if the Ombudsman believes that the delay was as
a result of exceptional circumstances."

33.6
explain that the Ombudsman can only look at whether the matter was dealt
with in accordance with the Scheme (tmless paragraph 34 applies).

34.
If on or after 1 July 2015 the Firm and the Customer agree that the Scheme Complaint
should not be dealt with by the Ombudsman in accordance with the Scheme then-

34.1
neither paragraph 33.5nor paragraph 33.6 will apply; and

34.2
the written conummication from the Firm containing the Redress
Detemtination will-

34.2.1 explain that if the Customer remains dissatisfied with the Firm's

response. he may refer his complaint to the Ombudsman

34.2.2
explain that the complaint will be dealt with by the Ombudsman by
reference to what is fair and reasonable in all the circumstances of the
case:

34.2.3
explain that the Finn may agree that the complaint can be dealt with
by the Ombudsman even though the relevant time limits for referring
the complaint to the Ombudsman may have expired: and

34.2.4
include the appropriate wording from DISP 1 Atmex 3R.

Gf.n(>l'al pl'OYisions about all complaints

35.
The Finn must establish and maintain a fair and intelligent filtering of complaints to
identify whether a complaint (or any part of a complaint) received (whether before or
after the date that these Requirements come into effect) that has not yet been resolYed
is a Scheme Complaint.

36.
If the Finn or Acenden (on behalf of the Finn) receive a complaint from a Customer
that (in whole or in part) falls outside the Subject Matter of the Scheme. the Finn will
resolve the complaint (or that part of the complaint) in accordance with their
obligations tmder DISP 1. The Finn's final response will infonu the complainant
that. to the extent the complaint is not a Scheme Complaint. that the complainant may
refer it to the Ombudsman to be determined in accordance with what is fair and
reasonable in all the circumstances of the case.

Tnnspal'(>Dcy

3 7.
The FCA will publish these Requirements on its website.

l.
In these Requirements. the following tenns haYe the following meanings:

a)
''Acl'ndl'n'' means Acenden Limited. formerly trading as Capstone Mortgage
Services and the Firm's third party administrator and agent:

b)
"Al~' means the monthly atTears management fee imposed in the period
from 1 January 2010 atld 2 April 2011. by or on behalf of the Firm. on
Customers in respect of their Mortgage:

c)
''Arrl'ars Fl'l'., means any or all of the AMF. LMF atld or RMF:

d)
"AuthOiity" meru1s the body corporate fonnerly known as the Finrutcial
Services Authority atld renamed on 1 April 2013 as the Financial Conduct
Authority:

e)
"Customl't·" means an Existing Customer and/or a Fomter Customer as the
context requires:

f)
"Existing Customl'r .. means someone who is currently a customer (within the
meruling of the Authority's Handbook) of the Finn who has entered into and at
the time of payment of Redress still has a Mortgage: and on whom Arrears
Fees were imposed by or on behalf of the Firm during the Material Time:

g)
"Firm" means Southern Pacific Mortgage Limited (FRN 302027):

h)
"FormPr CustomPt·" meruts a customer (witllin the meruling of the
Authority·s Handbook) of the Firm and who had entered into a Mortgage but
at the time of payment of Redress no longer has one. either because it has been
repaid in fi.tll or because it has been enforced or amotutts due have been
written off and on whom An·ears Fees were imposed by or on behalf of the
Firm during the Material Time:

i)
''FSMA" meruts the Finru1cial Services and Markets Act 2000 (as amended):

j)
"lntPrl'st ComponPnt" means that ammmt of the Redress which represents
interest of 8% simple interest per aiUll.Ull on the difference between what it was
reasonable to charge in relation to the An·ears Fees and what was actually
charged as calculated in accordance with paragraph 16:

k)
"LMF' means the monthly litigation mrutagement fee imposed during the
Material Time. by or on behalf of the Firm. on customers in respect of their
Mortgage:

1)
"MatPtial TimP" means 1 January 2009 to 31 August 2012 inclusiYe:

m)
"Mol'tgage" means a regulated mortgage contract (as defined in the
Authority's Handbook of mles and guidance) entered into on or after 31
October 2004. between the Finn and a Customer:

n)
''Ombudsman" means the Financial Ombudsman Service:

o)
"Other Amounts Dut>'' means the balance showing on the Customer's
Mortgage accom1t as 'Other A.Inom1ts Due' but only in so far as that balance is
comprised of the A.MF. LMF. RMF and late payment fees;

p)
"Pt>Imission" means the Firm's pennissionlUlder Part 4A ofFSMA:

q)
"Rt>dl't>Ss" means the amotmt calculated in accordance with paragraph 16
aboYe as payable to or otherwise due to the credit of a Customer:

r)
"Redrt>ss Dett>l'mination" means a written conumuucation from the Finn to a
Customer in respect of a Scheme Complaint which:

(i)
sets out the results of the Finn's detemunation tmder the Scheme:

(ii)
encloses a copy of the Ombudsman's standat·d explanatory leaflet: and

(iii)
infonns the complainant that if he is dissatisfied, he may make a
complaint to the Ombudsman and must do so within six months:

s)
"tht>se Requil'emt>nts" means the requirements and proYisions in tlus
docmnent including its annexes;

t)
"RMF' means the monthly repossession management fee in1posed during the
Material Time, by or on behalf of the Finn. on customers in respect of their
Mortgage:

u)
"Scht>mt>" means the redress scheme wluch the Finn is required to establish
and operate llllder these Requirements. wlllch is a constmter redress scheme
for the purposes of DISP: wluch has as its subject matter the Subject Matter:
and further details ofwluch are set out in paragraphs 10 to 36 aboYe:

v)
"Scht>mt> Complaint" means a complaint made by a Customer to the Firm. or
to Acenden (on behalf of the Finn):

(i)
wlllch falls within the Subject Matter of the Scheme: and

(ii)
was received by the Finn-

(1)
after the date of these Requirements: or

(2)
no more than 8 weeks before the date of these Requirements.
where at the date of these Requirements. the Finn had not sent
a final response to the complainant.

Where part of such a complaint falls within the Subject Matter of the Scheme.
DISP 1.1.11AR shall apply in respect of that part:

w)
"Shol'tfall Custome-1·'' means a Customer in respect of whom all of the
following conditions are met:

(i)
The Customer's property has been repossessed by or on behalf of the
Firm m1der the tenus of a Mortgage:

(ii)
The proceeds of sale of the Customer's repossessed property were
insufficient to discharge the amotmts owing tmder the Mortgage.
including any Arrears Fees:

x)
"SubjKt Matte-1"" of the Scheme means any clain1. action or other right of any
description however arising:

(i)
in relation to. or in collllection with. the level of An·ears Fees imposed
(and specifically. the excessive nature of any Arrears Fees imposed) by
or on behalf of the Finn during the Material Time on a Customer in
respect of and in cotmection with a Mortgage: and

(ii)
provided that the Customer has not already complained about the
matter and the complaint has not already been resolved in accordance
with DISP 1.4-1 .6.

However. any claim. action or other right of any description however arising
conceming any other aspect of Arrears Fees, for example whether it was
appropriate to impose one. is outside the Subject Matter of the Scheme.

2.
For the purposes of .Aimex A. paragraph l(x). a complaint is resolved in accordance
with DISP 1.4-1.6 (and therefore outside the Subject Matter of the Scheme) if:

(i)
the complaint (or part of the complaint) related to the level of one or more of
the AMF. LMF or RMF charged by the Firm dming the Material Time:

(ii)
the Customer has accepted an offer of redress by the Finn in full and final
settlement of the complaint: and

(iii)
that redress has been paid by the Finn to the Customer. or an amotmt equal to
the redress has been set-off against fees otherwise due from the Customer to
the Finn.

Annt>x B: ct>rtaio complaints to bt> dt>alt with by tht> Ombudsman

B.l
The prm.·isions of tlus a1mex are included in the Finn's Part 4A Pemussion tmder
section 404F(7) ofFSMA.

B.2
Subject to B.7 below. thls Annex applies where--

B2.1 a Scheme Complaint is referred to the Ombudsman on or after the date that
these Requirements take effect:

B2.2
within 14 days of the Ombudsman telling the Finu in wntmg that the
complaint has been refe1Ted to the Ombudsman. the Finn tells the
Ombudsman in writing that the complaint (or part of the complaint) is a
Scheme Complaint.

B.3
Subject to B.2 above and B. 7 below, tl:lls Annex applies where--

B3.1 a Customer makes a Scheme Complaint to the Ombudsman in respect of an
act or omission of the Firm and. at the tin1e the Scheme Complaint is made. it
is to be dealt with (or has been dealt v. ith) tmder the Scheme:

B3.2
a Customer is not satisfied with a Redress Determination made by the Firm
under the Scheme: or

B3.3
a Customer considers that the Firm has failed to make a Redress
Determination in accordance with the Scheme.

B.4
Subject to B.7 below. the Ombudsman is required to detemline the Scheme Complaint
tmder section 404B of FSMA on the same basis as if the Scheme were a consmner
redress scheme tmder section 404 of FSMA.

B.5
Broadly (and subject to B. 7 below). tl:lls means that the Ombudsman is required to
decide the Scheme Complaint on the basis of what the determination tmder the
Scheme should be. or should have been. instead of on the basis of what the
Ombudsman considers to be fair and reasonable in all the circmnstances of the case.

B.6
Where a complaint is made to the Ombudsman in wl:llch only part of the complaint is
a Scheme Complaint within paragraphs B.2 and B.3 above. the Ombudsman will deal
with that part of the complaint winch is a Scheme Complaint in accordance with
paragraphs B.4 and B.5 abm.·e and will deal with the remainder of the complaint in the
usual way in accordance with DISP.

B7.1 a Scheme Complaint is refe~Ted to the Ombudsman on or after 1 July 2015:
and

B7.2
the Finn and the Customer agree under section 404B(lA) or (2B) of the
Financial Services and Markets Act 2000 that the Scheme Complaint should
not be detemlined by reference to what. in the opil:llon of the Ombudsman. the
detemlination tmder the Scheme should be or should ha\\u00b7e been.

the Ombudsman will detenuine the Scheme Complaint (or that part of the complaint
which is a Scheme Complaint) on the basis of what the Ombudsman considers to be
fair and reasonable in all the circumstances of the case.