The Office of Fair Trading has declined to investigate HSBC over the small size of its conveyancing panel, saying the arrangement does not have a ‘sufficiently negative impact on competition’.

East Grinstead sole practitioner Elaine McGloin contacted the watchdog after HSBC announced its new panel in January. The panel contained only 39 solicitor firms and four licensed conveyancers companies.

McGloin told the OFT that the lender’s action restricted freedom of consumer choice and was anti-competitive, as the majority of firms would not be able to compete for work from clients with an HSBC mortgage.

The OFT said it would not take any action because HSBC’s actions are ‘not having an appreciable effect on competition at this time’.

Responding to a follow-up letter from Rob Hailstone, chair of the high street firm network Bold Legal Group, the OFT said: ‘Given HSBC’s relatively small share of the mortgage lending market and the fact that proportionately it will continue to have a significant list of firms on their panel, and consumers still have a wide choice of firms and lenders to choose from, it is not clear to us that the issue is having a sufficiently negative impact on competition (and therefore causing detriment to consumers) to warrant the OFT prioritising it.’

The OFT said that despite the change HSBC still has a ‘fairly significant’ panel of solicitors, adding: ‘We expect that it will continue to have an extensive conveyancing panel which includes smaller as well as larger firms.’

It noted that HSBC customers can instruct other firms not on HSBC’s panel, but must cover the cost of a panel solicitor to act on behalf of the bank, which the OFT said ‘may well be a legitimate commercial decision by HSBC to protect its interests in the transaction’.

In addition, the OFT said: ‘Justifications to HSBC’s actions may be in line with maintaining consistent quality of service. This may be better achieved by HSBC using certain solicitor firms who are more familiar with the bank’s procedures, consistently carry out a certain volume of work and may be more familiar with the bank’s requirements as they change.’

It added: ‘Customers of HSBC may also benefit from the lender’s ability to monitor and control quality due to the repeated interactions they have with their panel firms.’

A spokeswoman for HSBC, which has a 10% share of the new sales mortgage market, told the Gazette that the panel is not closed and currently has 33 applications being considered.

Commenting on the OFT’s view, McGloin said: ‘Its approach seems short-sighted, looking at HSBC’s actions as just a one-off.’

But she said: ‘Other lenders may follow suit, which will be a big issue for firms, especially smaller ones, as it will drive work away from the high street to big out-of-town factories, which are rather faceless.’

Hailstone added: ‘The OFT is missing many points when it comes to considering the wider implications of this matter.’

He said he received ‘horror stories on a daily basis’ from firms detailing delays and inefficiencies by some of the HSBC panel firms, and will be writing again to the OFT asking it investigate the matter urgently.

Desmond Hudson, Law Society chief executive, responded: 'While the OFT may have offered an individual response to Ms McGloin, I certainly don’t think the door has closed on this issue. The Society has had recent contact from the OFT, requesting additional information on these and related issues. We have provided a detailed response. If the OFT were to act, it would most likely take the form of a study into the wider lending market, rather than merely an investigation into an individual lender.

'We will be in contact with Ms McGloin to add her concerns to our other evidence. It would be helpful if members continue to contact the Society first rather than approach bodies like the OFT directly. In the meantime, the pressure felt by HSBC as a result of the campaign by the Law Society and its members is undoubtedly mounting.

'We will continue to press for a change in the banks approach to its conveyancing panel, in our members’ interests and in the interests of consumers.'

Meanwhile, HSBC's head of lending Martijn van der Heijden revealed the criteria for its panel membership. These are:

  • Firms must be regulated by the Solicitors Regulation Authority or the Council of Licensed Conveyancers; have a minimum of four regulated principles or directors and at least two licensed conveyancers or qualified solicitors.
  • Entities must have been actively trading in purchase and sale conveyancing for at least six months; completed a minimum of 250 residential conveyancing transactions (excluding remortgages) over the previous two years; and have professional indemnity insurance cover of at least £2m.

In addition, all panel firms must work for fixed fees; establish electronic links with the panel manager to facilitate case allocation and case tracking; and have accreditation with the Law Society’s Conveyancing Quality Scheme.