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FSCS confirms £15m emergency levy against mortgage brokers

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The Financial Services Compensation Scheme has confirmed that mortgage brokers will have to pay a £15m supplementary levy this year.

The levy, mooted last December, will pay for “unforseen compensation costs” in the 2016/17 year, according to the lifeboat fund.

The FSCS says the levy is needed because if the cost is carried over into 2017/18 then the bill might get passed on to other areas of financial services.

The claims body says: “The FSCS is raising a supplementary levy against home finance intermediaries because of the risk that, if carried over into 2017/18, the £15m shortfall might result in the £40m annual limit for these firms being exceeded.

“This will impose costs on other industry sectors through a cross subsidy.”

The FSCS’ latest business plan, published today, shows the £40m limit could be breached because the body expects its mortgage broker levy for 2017/18 will rise to £14m from £6m in 2016/17.

The business plan says one unspecified firm is responsible for most of the claims that led to the £15m levy.

It says: “Although claims volumes have risen for this year, and into 2017/18, this is distorted by the level of compensation forecast for claims against one particular firm which accounts for nearly 70 per cent of the forecast costs.

“These are claims for advice to remortgage domestic residences to invest in high risk property schemes.

“Stripping out these claims reduces the level towards those experienced over recent years, so that on current evidence we would not expect this level of costs to continue into future years.”

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  • Peter Turner 20th January 2017 at 1:45 pm

    Who is the “one particular firm”, then?

  • Rob Jupp 17th January 2017 at 9:44 am

    Utterly outrageous on every single level! Why should advisors that can’t and don’t offer savings schemes have to pay a significant cost for something that they have never been involved in? I’m sure AMI will be leading the line on this and doing all they can.

  • Steven Balmer 16th January 2017 at 2:53 pm

    So effectively it was an investment idea that went wrong and the FCA failed to spot it in time, nice! What about the over payment mortgage brokers have already made to FSCS costs in past years that had not been corrected. It seems to me the FSCS will bill anyone who they think can cover the costs, irrespective of fairness or value for money. Must have bled out the smaller investment adviser to the point they know it is unsustainable already; the the real reason behind the funding review is ability to keep the trough open.

  • Simon Charles 16th January 2017 at 1:49 pm

    This is obscene. If I am reading this correctly basically the FSCS is imposing a levy on firms that have provided advice in the correct manner to support claims made against a company who hasn’t!

    How can an arbitrary organisation penalise a whole industry predominantly off the back of one firms activity?
    Going forward, as brokers are we therefore expected to fund all errors made in our industry by companies we cannot control? Who was supposed to control this firm and why are funds to pay for this not being allocated from their budgets i.e. the FCA, or even the directors of the company that allowed this practice in the first place.

    The spread of this load may well be fairly negligible overall however it doesn’t make it right. It’s like having to pay part of someone elses speeding fine because they happen to drive the same make of car you drive!

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