Brokers face surprise FSCS levy

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Brokers face a surprise levy from the Financial Services Compensation Scheme because the body underestimated the value of claims that mortgage brokers are liable for by £18m.

The FSCS’ latest Outlook document says the body expected to pay £6m in claims in the 2016/17 year that are subsidised by the home finance intermediation fee block.

However, the FSCS is now forecasting £21m in claims, £15m more than expected.

The additional £3m of the £18m shortfall comes from claims brought forward from the 2015/16 year.

The FSCS says it may need to raise a supplementary levy on mortgage brokers as a result.

The FSCS adds: “In addition to the rise in the number of claims, there has been a rise in the uphold rate and the average amount of compensation we have paid per claim.

“In particular, there has been an increase in claims relating to advice to borrow to invest in non-standard assets, including overseas property.”

The FSCS will make a final decision on the levy in January.

FSCS chief executive Mark Neale says: “We raise levies in the spring to finance the costs we expect to incur in the year ahead.

“If we under-estimate those costs, we may then need to raise supplementary levies. We cannot turn to a fund like many of our sister organisations internationally.”