The Bank of Scotland's practice of restructuring and increasing monthly instalments plunged borrowers into depression, a judge held.According to Master Ellison the lender was "having its cake and eating it" when mortgage lenders defaulted on their payments.He said: "There may not be any fraud involved, but I would certainly not regard this as fair accounting."His verdict came in three cases brought by the bank involving claims for house repossessions.The court had to determine whether the lender can both consolidate mortgage arrears by increasing monthly instalments through a process known as capitalisation, and also rely on the arrears for possession proceedings.The judge, however, held that mortgages should no longer be regarded as in arrears once capitalisation had taken place.It is,sadly, impossible to know how many borrowers have as a result of the plaintiff's practice been plunged into depression or the exacerbation or initiation of other stress related illness and so forth, ie, the hidden, but all too real, human cost.Master EllisonHe said the bank's practice of unilateral consolidation is much more longstanding and common than initially anticipated."It is also impossible to know how many defaulting borrowers were faithfully or unsuccessfully trying to pay an amount each month in addition to the monthly instalment not knowing that they need not do so, that all they had to do is to keep paying the consolidated monthly instalments," Master Ellison said.Master Ellison found that the bank's reliance on extinguished arrears could be described as double-billing.He added: "Unilateral consolidation with double-billing creates very real problems for borrowers, their advisers and the court."To the extent at least of the double-billing, it is unconscionable."The practice unfairly and confusingly distorts perceptions of affordability, the court heard.Borrowers in default are faced with increased monthly payments to deal with the arrears, along with a demand - and threat of repossession - for the immediate payment of the erstwhile arrears."This is, to say the least, confusing and must be a disincentive for many borrowers to make best realistic proposals to the lender or the court to address the arrears," Master Ellison added.It also distorts the true arrears figures in the minds of those approached for advice and the court."He confirmed that future applications by the bank for possession should also include details on the state of account and of any consolidation.Clarity and transparency are essential during possession proceedings, otherwise very real problems can be created.Housing Rights ServiceThe Housing Rights Service, which took the case, uncovered the issue when a number of customers contacted its mortgage debt advice service.The organisation's advisers noticed a pattern of unexplained increases in Bank of Scotland customers' mortgage payments despite there being no rise in the bank's interest rates.Christopher McGrath, from the service added: "The law provides protection to borrowers in that it allows the court discretion to stop possession action when a borrower can put forward a payment arrangement."However, the actions of Bank of Scotland distorted this discretion. It is our view that this practice unfettered would undoubtedly have resulted in many borrowers unnecessarily losing their home."The findings could have implications for thousands of Bank of Scotland mortgage holders across the UK."The Bank of Scotland is a major mortgage lender in Northern Ireland under the Halifax brand, and is owned by the Lloyds Banking Group.Lloyds Banking Group spokeswoman said: "We encourage customers to contact us at the earliest opportunity if they believe that they will be unable to make their monthly mortgage payment."Repossession is always the last resort and we work hard to ensure that we are providing customers facing financial difficulty with the right support to help ease their circumstances and ultimately help to resolve the situation."We are currently considering the Northern Ireland High Court judgment made on 4 August and our position following that judgment."Once we have fully reviewed the findings, we will respond accordingly."