The Finance Trading Standards Association is urgently seeking legal advice for its members following the landmark Hurstanger case.
The industry is currently holding its breath to see if brokers will be faced with a flood of borrower claims after the case ruled a broker must disclose the amount of any commission it receives.
Hurstanger Ltd fell under the spotlight when borrower Delroy Wilson fell into arrears. Wilson claimed the orignial contract was made void because a £240 payment from the lender to the broker was not disclosed.
John Parker, the newly appointed chief executive of FISA is to consult leading counsel to get clarification over what a broker needs to disclose.
Parker says: “The Hurstanger case has major implications for both brokers and lenders. FISA will provide guidance to its members about what they need to do to comply with the law. To make sure this advice is robust and comprehensive we will, as a matter of urgency, be getting advice from leading counsel on the issues which the Court of Appeal did not specifically cover in the Hurstanger judgement – such as what disclosure needs to be made in relation to over-riding commissions or commission on the sale of PPI. In the meantime brokers worried about this can of course ring FISA to discuss the implications of the case.”
The Court of Appeal heard the Hurstanger case in April, which concluded that the broker has a duty to a borrower to disclose the amount of any commission it receives from the lender, obtain the borrower’s consent to it receiving the commission, and let the borrower know that this may mean it can’t give impartial advice.
If the broker does not disclose this then the broker may be liable to refund the commission.