Buy-to-let could be the first casualty in the wake of the recent court ruling on the non-disclosure of commission payments.
In the case of Hurstanger versus Wilson, secured loan borrower Delroy Wilson took lender Hurst- anger to court over a commission pay-ment it made to his broker.
Wilson claimed his original contract with the lender was void because a £240 commission payment had not been disclosed.
The court decided against voiding the loan contract, describing it as fair and enforceable, but ruled that commission should be disclosed to alert consumers about potential conflicts of interest.
Hurstanger was forced to pay Wilson the original commission of £240 plus interest of 1.29% a month dating back to August 2003.
An industry expert warns that the case could lead to a flood of similar claims, in particular from so-called ambulance chaser firms targeting products that do not come under the Financial Services Authority’s remit. Products like buy-to-let and secured loans, where the disclosure of commission isn’t mandatory, are believed to be partic- ularly at risk.
The source says: “While some buy-to-let lenders offer full disclosure, many don’t. It’s one of the consequences of the sector being unregulated.
“Any business that doesn’t do Key Facts Illustrations or full disclosures could find itself facing claims.”
A spokeswoman for BM Solutions says: “We treat buy-to-let like a regulated market but some players aren’t in a position to do so.”
But John Heron, director of mortgages at Paragon Mortgages, says: “I’ve never come across any issue raised by borrowers or brokers relating to the non-disclosure of commission.”
He says that while disclosure is not mandatory in buy-to-let, the majority of sales are made by FSA-regulated firms that do so as a matter of course.
He adds: “There’s no benefit from non-disclosure. Those firms that aren’t FSA-regulated tend to be members of the National Association of Commercial Finance Brokers and its code of practice demands disclosure.”