The rise in the number of claims management firms looking to recruit mortgage brokers is said to have caused unrest among some lenders, with them unofficially telling networks “it’s us or them”.
One network source who asked not to be named says: “We have been told in no uncertain terms by lenders that they will not tolerate us developing relationships with claims management firms, or our advisers using them.”
The Association of Mortgage Intermediaries has issued guidance to its members about claims management firms. It says that there is nothing wrong with well-run companies but warns brokers to think carefully before jumping into bed with one as it could be a “risky business”.
A legal specialist says he is aware of the growing number of financial claims management companies and that this is a sign of the industry turning on itself.
He says: “There are some ethical and legal questions surrounding whether the brokers who put cases through in the first place can then go back, look at their previous work and capitalise on mistakes made by lenders.”
Mal McConechy launched Liverpool-based Loan Resolutions last year. The firm specialises in complaints relating to the Consumer Credit Act.
He has enrolled a number of mortgage brokers into his business and says although some may see it as biting the hand that feeds them, they have few options.
He says: “If you look at the size of the predicted mortgage market in 2009 it’s hard to see where brokers’ income is going to come from.”
At the moment, 95% of all the cases McConechy deals with are settled out of court but he believes this may be because lenders are afraid legal precedents might be set.
Nigel Stockton, managing director of HBOS Intermediaries at Lloyds Banking Group, says the lender has not seen a rise in the number of claims management firms going after mortgage lenders, but if it noticed a network promoting such companies it would have to consider its position.
He says: “The amount of claims that have been directed against lenders has been minimal so far.
“If we saw evidence that a network was getting involved with a claims management specialist we would have to think about the situation, but we have certainly not been having conversations with networks on the subject.”