Fos rules energy units invalid for mortgage repayments

FT Adviser

Original article here

Dozens of enquiries relating to a “community bank” which claimed to offer units of energy as legal tender instead of cash, have landed at the Financial Ombudsman Service, with around ten investigated as formal complaints.

Most of the complaints relate to people unsuccessfully trying to use a ‘cheque’ from the organisation calling itself ‘WeRe Bank’ to pay off a balance with another business.

Fos has been forced to point out that as WeRe Bank is not an authorised business, it has not been able to consider consumer complaints directly.

In September last year, the Financial Conduct Authority issued a warning about WeRe, which claims to be a bank but does not appear to carry on any activities requiring authorisation by the regulator.

The Manchester-based venture purports to be a people’s or community bank which has created its own currency, the RE, claiming it is a unit of energy that can be used to discharge debt.

Members of the ‘Re-Movement’ are required to issue a promissory note to WeRe Bank to the sum of £150,000, which is payable “within a 10-year anniversary” from the time of joining. They are then able to buy RE cheque books which it the company claims can be used to pay tax, bills and mortgages.

At the time, of its warning the FCA stated: “We are concerned that vulnerable consumers may be attracted to WeRe Bank’s claim that they will be able to pay off their debts ‘for free’ using RE cheques, even though they have not had to pay any money into an account.”

Today (30 March), the regulator confirmed that its previous statement remains valid and it has received “numerous reports” of the organisation’s cheques not being accepted.

Martyn James, a spokesperson for the Fos, said the WeRe case is a good example of ‘if it sounds too good to be true then it probably is’, warning that there is no way to magic away money that you legitimately owe.

The ‘services’ provided by WeRe Bank seem to hinge on or relate to similar arguments to those the Fos has seen in some other cases, he said.

Over the past year it has received around 200 complaints where people experiencing difficulty repaying their mortgage, loan or credit card debt have said that they think their debt is not valid.

People who bring these complaints often refer to information they have seen online, which tends to quote obscure legal reasons as to why a mortgage, or other debt, is not enforceable, Mr James said. The people providing this information and reasoning often refer to themselves as ‘Freemen of the Land’.

In an ombudsman decision published in January, ‘Mr O’ argued paying off his £67,000 mortgage with a WeRe Bank ‘cheque’.

The initial adjudicator did not recommend the complaint should be upheld, being satisfied that WeRe Bank had no means of paying the lender the money required to redeem the mortgage.

Ombudsman Jan O’Leary used the decision to give a full account of her findings about WeRe Bank, explaining it was launched in the UK in about April 2015 by a sole trader, via a website and a mobile phone number.

“Mr O has paid cash to WeRe Bank for what is, in effect, a book of worthless pieces of paper designed to look like genuine cheques but which have no actual value and can’t be used to pay debts,” read the notice.

“In addition, Mr O has signed a contract in the form of a promissory note to pay WeRe Bank £150,000. I don’t know if WeRe Bank will ever call in the promissory note. But I’ve looked at the template on its website and it seems to me to create a legally binding obligation on Mr O to pay the money if WeRe Bank demands it.”

Ms O’Leary said it’s possible Mr O has been the victim of a scam and suggested calling the police.

“I cannot emphasise strongly enough the seriousness of the position in which Mr and Mrs O now find themselves. They are faced with the prospect of losing their home.”

WeRe Bank’s website is currently inactive, but its founder Peter Smith told FTAdviser that the instruments it deals with are valid.

“The promissory note is predicated on the fundamental bedrock that underlies every financial transaction. One man’s promise is as good as another man’s just as our money is as good as any other bank.

“We’re not a corporate entity, so we don’t want anything from the government or the regulators and they can’t touch us either.”

He added that WeRe Bank is now in over 50 countries and no regulator has been able to disprove their model.