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Broker concerns over claims firms targeting historic mortgages

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Intermediaries worry that claims management companies are encouraging a wave of compensation against brokers and lenders for historic mortgages.

A significant amount of CMCs that once handled PPI claims are moving into other areas.

This is fuelled by the Financial Conduct Authority this year announcing the final PPI claims deadline in 2019.

Therefore CMCs have begun to hunt for claims against areas including self-cert loans, interest-only and endowment mortgages and general bad financial advice.

Lentune Mortgage Consultancy managing director Stuart Gregory says: “Following the PPI scandal, and the establishment of the ‘red line’ from the FCA on claims for that, the claims management companies need another target.”

Mortgage brokers are worried of an influx of claims against them and lenders.

John Charcol senior technical manager Ray Boulger says either type of firm could be claimed against.

He says: “If they have the choice of lender or broker, they will probably pick the company with the biggest pocket.

“But if the client is using a broker and is complaining about the advice then they’ll probably claim from the broker, it depends on what they are complaining about.”

Gregory thinks interest-only mortgages will be the main battleground.

He says: “These claims companies are currently using Facebook, its seems, as a means of attracting clients – with sponsored posts appearing leading many borrowers to believe that after mortgage regulation was implemented in 2004, that there’s every chance they were mis-sold interest-only.”

But some brokers say there are legitimate mis-selling claims.

Trinity Financial public relations and communications director Aaron Strutt says: “Some people were mis-sold mortgages, if they have a legitimate claim where they were unfairly treated then fair enough.”

However concerns remain over fake claims.

Sheppard says: “When people see pound signs they’ll try and see if they can get free money.”

Some think the issue with mis-sold mortgage claims will only snowball in the future.

Your Mortgage Decisions director Dominik Lipnicki says: “As PPI comes to an end we’ll see even more.”

But others say the issue will be fairly contained.

Maxwell Moore director Jonathan Moore says: “There has been mis-selling of mortgages to a degree, especially prior to the credit crunch, but I am unconvinced it can be turned into a widespread market in the way that PPI has been.”

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  • Paul Smulovitch 13th October 2017 at 7:32 am

    Whilst I am personally happy that our business has always given correct advice and documented it and therefore is safe from the money grabbers it is a sad indictment of society. People come to a broker or bank looking for a mortgage and decide upon interest only for whatever the reason and banks/brokers facilitate that. Do the brokers earn more for interest only? No. Are they harder to place? Yes. Therefore what incentive is there for a broker to place this deal unless specified by the client themselves. However shine an opportunity for compensation and money grabbing claims companies practically urging anyone with an interest only mortgage to claim and then you have it. People who know they are not entitled all of a sudden say I didn’t want it. I never knew I had to repay the money and cant now. Its deplorable. For genuine brokers this now takes significant time to defend themselves and generate the paperwork too defend claims taking precious time away from helping clients who aren’t money grabbing fraudulently and ultimately for some it will destroy their business with either stress or inability to service the demands for paperwork from the companies and regulators to defend this ultimately having a negative impact on the economy.
    If someone was mis sold then that is fair enough, but I feel the majority are and were fully aware and making a quick buck where possible and the claims companies are disgusting for the approach in adverts which say if you have an interest only mortgage you could claim. Who tells clients to take interest only unless the client specifically asks for this.
    Shame on the companies pushing this, shame on the people making fraudulent claims and shame on the authorities for not stamping down on this.

    • Chris Hulme 13th October 2017 at 4:52 pm

      You’ve hit the nail on the head there Paul.
      The reality is that there are only around 10% of brokers left from the 100,000 plus brokers at the peak of the market 10 years ago. That leaves two major issues:
      The cream of the broker community that remains will be hit with untold costs of defending even the simplest of accusations, costs that cannot be recouped if a claim us proven to be unfounded or vexatious mud slinging.
      On the basis that the main issues of poor advice will rest with brokers that have left the industry, the FSCS will be picking up the tab for well over 90% of claims being made.
      Perhaps the time has come for there to be some kind of recourse for the industry as a whole where they are faced with mud slinging or vexatious claims of unsuitable advice.