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Code-breach IFA fined record amount

Mortgage brokers who advise clients based on information from lead generators and sourcing systems risk huge compensation claims, the MCCB warned last week.

The Mortgage Code Arbitration Scheme has ordered an intermediary to compensate a customer £66,300 for failing to give suitable mortgage advice, the largest ever payout for a breach of the code by over £40,000.

MCAS found that the intermediary had not exercised the due care required when selling an equity release mortgage to clients. By relying on information provided by a third party (the original introducer of the business), the intermediary failed to ensure that the client fully understood the arrangements being made on his behalf.

The Code stipulates that the firm should have dealt directly with the clients to determine their circumstances and requirements on which to base their advice.

MCCB spokesman Brad Baker says: “Intermediaries relying on third parties are still responsible, even if they argue it was the third party&#39s mistake.”

He adds: “This shows the strength of the redress arrangements in place under the Code and the fact that customers are being protected. This also shows the value of our requirement that brokers have professional indemnity cover.”

MCCB compliance monitoring has recently focussed on firms who state they are providing an &#39information-only&#39 level of service. From the sample of firms visited, a large percentage were found to be operating a sales service, which the MCCB says “could lead the customer to believe that advice/recommendation was being provided”.

As a result, seven out of 10 of the firms in the sample whose sales processes were questioned have changed their declared level of service to &#39advice/recommendation&#39. The MCCB says such customer confusion is on the increase as a result of the use by intermediaries of screen-based information or &#39decision trees&#39 that seek personal information from customers.


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