HSBC radical separate representation move splits market

HSBC radical separate representation move splits market

In a radical move that could restructure the way in which the conveyancing market operates HSBC has decided to opt for 100% separate representation unless the conveyancer is on a panel of only just over 40 firms.
Some months ago Countrywide won the tender to panel manage HSBC’s conveyancing.  Since then a number of large conveyancing firms have been put through due diligence. Processes have been put into place to enable HSBC to ensure it, rather than the consumer, determines who will represent the bank for conveyancing work.
Paul Creffield, Corporate Operations Director at Countrywide, commented:
"We are delighted to have been selected by HSBC to manage their Conveyancing Panel Management operations. We have the scale to deliver bespoke in-house conveyancing solutions and welcome the opportunity to work with HSBC to safeguard its home buying mortgage customers and minimise any potential risk to the bank.” 
Interestingly HSBC have chosen just over 40 firms, with all the solicitors in England and Wales being CQS (Conveyancing Quality Scheme) accredited to the clear delight of the Law Society.   Some of the firms appear to be in the Conveyancing Association but this does not appear to have been a critical factor in the selection criteria.
HSBC borrowers will now be given a choice; a) you use your own conveyancer and pay for one for us as well; or b) just use ours.  Consumers will have a choice of conveyancers for themselves but with it will come an extra delay in the chain whilst two conveyancers on one side of the transaction agree they are both happy to exchange and complete before they even talk with the rest of the chain.  We suspect that most borrowers will choose to allow the HSBC conveyancer to act for them as well.
The HSBC press release is titled “HSBC Introduces Conveyancing Panel to Assist Mortgage Customers” and says that their customers will benefit from “speed, efficiency, and consistent quality of service”.  If the borrower chooses to use the HSBC appointed firm they will receive a “no sale, no legal fee promise” and a free search on a replacement purchase within 6 months.  However many will suspect this move has less to do with borrower service and more to do with the way the general conveyancing market has failed lenders in respect of control over fraud and negligence in recent years and that this is a risk prevention measure for HSBC following the FSA thematic review.
HSBC says that the borrowers opting to use the panel for their own legal representation will also benefit from fixed fees, 24 hour updates, and that the service will be managed to ensure that conveyancers on the panel carry out their work in a timely manner.
If a consumer wishes to have their own conveyancer the separate representation for the bank will cost the consumer £160 plus VAT.  The legal fees for the joint representation service starts at £399 for transactions up to £100,000 in value rising to £549 in steps for transactions between £300,000 and £500,000.  No mention is made in the press release of referral fees, the costs for disbursements charged or any other cost consumers may incur such as title insurance.
Eddie Goldsmith of Goldsmith Williams has commented, saying:
“The move by HSBC may well lead to customers having to pay more for services, which is, of course, unfortunate for the consumer, but it underlines the challenges out there for the conveyancing industry. Customers are unlikely to be prepared to pay extra than they need for conveyancing and this restricted panel offering inevitably signals a growing trend which is likely to be followed by other lenders. I suspect HSBC’s announcement is just the beginning of the shape of things to come.”
Desmond Hudson the Chief Executive of the Law Society commented, saying:
“HSBC’s decision to appoint only CQS accredited firms to its panel is further evidence that the scheme is firmly establishing itself as an essential standard for lenders. Nevertheless, we are concerned that fewer than 42 firms will serve home-buyers who use HSBC for their mortgage in England & Wales. Does this provide sufficient consumer choice?
Although HSBC has a relatively small share of the mortgage market, such a low number of firms could struggle to provide all consumers — those who struggle to communicate other than in person or those who would prefer to use a local solicitor with the service they seek. With more than 1000 firms holding the CQS accreditation mark in England & Wales, HSBC need not limit its panel to fewer than 42.
It is disappointing that HSBC failed to consult the Society. I suspect they have made the calculation that the majority of their customers will opt to use the bank’s solicitor.
Being on a panel such as that will be valuable. How long will bankers resist the temptation for a quick profit by selling places on that panel and putting up costs for house buyers? This is not in the long term interests of consumers. HSBC should reconsider.
The disabled, those living in rural areas or even those wishing to simply use their family solicitor will either have little choice but to opt for the same solicitor as HSBC — one of their panel firms — or pay twice over – for their own solicitor as well as HSBC’s legal fees.”
A change of this scale could in the short term encourage many solicitors to avoid conveyancing and leave the market but it in the medium term it places conveyancers in a position where they are within the remortgage market.  In that market large panel managers and lenders use a very small number of firms at competitive prices to deliver very commoditised services to consumers.
Rob Hailstone of The Bold Group said "This is another nail in the coffin for many high street law firms. When will they find the stomach to unite and fight?"
Tim Higham, Head of Residential Property at Trethowans stated defiantly "We are confident our clients will pay £160 to use us over a panel conveyancer to ensure they receive proper and comprehensive advice."
If the service experience and risk profile of this project is successful other lenders are likely to follow with new lenders who may enter the market in the next couple of years more likely to replicate the model. 
We think that the service that HSBC will demand for its customers will be excellent but there will be challenges for some of the smaller panel firms taking on an additional 100 — 200 cases per month.  Countrywide have been recruiting heavily in recent months and now have the resources and platform to monitor this. 
Other firms not on the HSBC super panel will feel threatened and concerned for their future but this should not detract from the fact that had the conveyancing market properly looked after its lender clients in the first place it wouldn’t be where it is now.

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