A row over the effect of lenders’ conveyancing panel policies on consumer choice escalated this week, with HSBC denying a claim that it is forcing customers to use firms on its new panel. The bank, which has 10% of the UK mortgage market, prompted outrage earlier this month by announcing the creation of a panel including just 39 solicitor firms.

The Law Society and others have raised concern about the role of panel manager Countrywide, which operates the largest estate agency in the UK and itself provides residential conveyancing through a licensed conveyancing company which has a place on the HSBC panel.

In one disturbing development, Melanie Lawrence, an associate at Hertfordshire firm HRJ Law, told the Gazette that branch staff had informed a client seeking a mortgage with HSBC that he must use a solicitor on its panel. Lawrence said the client, who was assertive and articulate, advised the bank that under no circumstances would he use a panel firm and that he would rather have a mortgage from a different lender.

Eventually, she said, HSBC told him that the mortgage ­element of the purchase would be conducted by ‘Countrywide’ for a fee of £192, which he would have to pay. The mortgage consultant advised the man to ask his own solicitors to knock that amount off their fee. Lawrence said: ‘Consumer choice is being completely restricted and clients will lose out.’

An HSBC spokesman apologised for ‘any misunderstanding’, adding: ‘All branch staff have been made aware of the new conveyancing panel and that customers are free to use their own conveyancer should they wish.’ The lender said it had ­introduced the new panel in response to the Financial ­Services Authority’s recommendations for tackling ­mortgage fraud.

However, the move has met with hostility from many high street firms, the vast majority of which will not be able to act for clients taking HSBC mortgages unless those clients are willing to pay for two sets of advice. Many high street conveyancers are already feeling the pinch of reduced transaction volumes.

Comments on the Gazette website questioned whether the 43 panel firms, 39 of which are solicitor firms and four licensed conveyancing companies, will provide ­sufficient coverage to enable customers to instruct a nearby firm. Some readers called on the Solicitors Regulation Authority to prohibit solicitors from acting for both buyer and the lender. Others warned that such a move would only work to drive work towards licensed ­conveyancers which, unless their regulator implemented a similar prohibition, would remain able to act for both ­parties.

Law Society president John Wotton has complained to ­business secretary Vince Cable about the bank’s decision, while talks took place last week between Chancery Lane and panel manager Countrywide. In an open letter to solicitors, Society chief executive Desmond Hudson urged ­solicitors to contact their MP in protest and consider using any shareholding they may have in HSBC to air their grievances. 'This decision by HSBC is ­damaging both to the ­consumer interest and to the profession, and operates in our view to no one’s interest other than the short-term interests of ­Countrywide and HSBC,’ said Hudson.

He said the Society itself is considering purchasing a small number of HSBC shares as a further avenue to press its ­concerns.

Andrew Bingham, sole principal at Leicester firm Bingham & Co, voiced the concerns of many conveyancers that other lenders would follow HSBC’s lead and reduce the size of their panels.

‘High street conveyancers are already struggling due to the market and referral fees, and if other lenders cut their panels, it will spell the end for high street conveyancers,’ he warned. Bingham also questioned the decision of HSBC to appoint

Countrywide to ­manage its panel. Bingham said: ‘The solicitors’ profession is now subservient to licensed conveyancers and has to go cap-in-hand to a firm of licensed conveyancers.’

The Gazette has sought ­clarification from HSBC on the process of appointing ­Countrywide and on any ­conflict of interest that may have arisen, as well as details of the fee arrangements between panel firms and Countrywide, and Countrywide and HSBC. Details of firms on the panel have also been requested, to give an indication of the panel’s geographic coverage. The Gazette also asked HSBC about its plans to extend the size of the panel, which it says is open for applications.

HSBC had failed to respond to any of these questions when the Gazette went to press. Countrywide could not be contacted for immediate comment. Other major lenders contacted by the Gazette, including Lloyds Banking Group, Santander and the Co-operative, all indicated that they had no plans to reduce the size of their conveyancing panels.

But in a separate development, Nationwide Building Society is undertaking another overhaul of its own conveyancing panel, removing firms that have not done work for its customers in the past 12 months. The Law Society criticised the use of ‘dormancy’ as a ‘blunt instrument’ that could result in firms that have high standards in ­conveyancing being removed.

Nationwide, which has around 10% of the UK mortgage market, has sent letters to some affected firms and will be sending others out over the next few weeks. A spokeswoman for Nationwide said the building society will retain its panel of several ­thousand firms. Firms with the Law Society’s ­Conveyancing Quality Scheme accreditation, or which can prove that they have been active in the previous 12 months, will be able to apply for reinstatement.

Hudson said he appreciated Nationwide consulting the ­Society, but added: ‘Dormancy based on zero transactions for Nationwide in 12 months is a blunt instrument for panel reviews. There are more ­sophisticated and accurate ways of assessing ­dormancy.’