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FSCS to help consumers hit by Network Data collapse

The Financial Services Compensation Scheme is stepping in to protect individuals who may have lost money as a result of dealings with five mortgage firms, including failed network Network Data.

Consumers across the UK can now claim compensation if they have lost money as a result of their dealings with five mortgage advisors the FSCS has declared in default.

The five firms are mortgage advisors PMSG Insurance Services Limited also trading as Professional Mortgages Services Group, Financial Quest UK Limited, Finance Direct (UK) Limited, First Class Mortgages Limited, and Network Data Limited.

Network Data went into administration in 2009 owing appointed representatives more than £2m.

Declaring the firms in default means they are unable or likely to be unable to pay claims against them and triggers FSCS protection for their customers.

Due to a recent change in the compensation limits, the maximum amount that consumers may be able to claim varies.

For mortgage advice and arranging the maximum level of compensation for claims against firms declared in default before 1 January 2010 is 100% of the first £30,000 and 90% of the next £20,000 up to £48,000 per person per firm.

However, if a firm was declared in default on or after 1 January 2010 the new compensation limit is 100% of the first £50,000 per person per firm.

The FSCS says some smaller businesses are also covered but only for deposit and investment claims. Larger businesses are generally excluded, although there are some exceptions to this – for example for claims in respect of certain compulsory insurances.

A smaller company must meet two of the following criteria (as set out in section 247 of the Companies Act 1985 or section 382 of the Companies Act 2006 as applicable):

o       Turnover: not more than £6.5 million

o       Balance sheet total: not more than £3.26 million

o       Total number of employees: not more than 50

Kate Bartlett, director of operations at FSCS, says: “The FSCS’s role is to help people who have lost money as a result of doing business with an authorised firm that is unable or likely to be unable to meet claims made against it.

“The FSCS helps to instil confidence in the financial services sector by ensuring consumers get the compensation they are entitled to when this happens. People who believe they may have a claim against the firms should contact the FSCS.”

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MARK BLACKWELL, MANAGING DIRECTOR, XIT2

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  • plonker 15th April 2010 at 3:16 pm

    I lost money through Black&White,Network Data and now Cartel…..Just want n organisation that I can trust..not much to ask.

  • Ian Denny 14th April 2010 at 4:40 pm

    The FSA are interested in the welfare of brokers or for that matter, the consumers. They are only interested in lining their own pockets!

  • Ian Denny 14th April 2010 at 4:40 pm

    The FSA are interested in the welfare of brokers or for that matter, the consumers. They are only interested in lining their own pockets!

  • Sean 14th April 2010 at 4:08 pm

    What is the point of this comment? – where is the evidence that consumers have lost out as a result of the failure of Network Data? – they are already covered by the FSCS – I have not heard any reports of mortgage mis selling by Network Data ARs – the losers in this are the ARs – this guy has got the wrong end of the stick completely.

  • Andy Valvona 14th April 2010 at 4:01 pm

    Lots of good points made here, particularly as to why the FSA appeared to sit back and not act, when it was obvious to many that Network Data were experiencing difficulties.

    The FSA has statutory objectives in 4 areas, the second of which states “……… our objectives will require us to protect consumers by ensuring that firms are competent and financially sound,…….” See http://www.fsa.gov.uk/Pages/Library/Communication/Speeches/1997/sp02.shtml

    I think the ovewhelming belief in the industry is that the FSA will need to re-examine it’s approach to this objective, in the light of the recent Network failures.

  • Kevin friend 14th April 2010 at 3:47 pm

    The real point here is not Networks, it is how the consumer has been Mis-sold mortgages by the regulated adviser market. Some are guilty some not! I have sympathy for upset AR’s but let us not forget how big the compensation pot will need to be. I am looking for the top 10 reasons why a mortgage was Mis-sold, any inocent Brokers who have always excercised best practice who would like to respond??

  • Mic2002 14th April 2010 at 3:21 pm

    I lost money after Optoma collapsed.First National continued to pay o/s proc fees to Optoma even though it was pointed out that there was no-one in head office,the phones were not answered and the staff had been told to leave days earlier.The reason given was ‘we are under contract..’

    They continued even though they knew this money was going into a black hole..

    I agree broker comms should be ringfenced.

  • Tony Lilley 14th April 2010 at 2:24 pm

    As ever, no help for the brokers who lost significantly more than than any client. When will there be an enquirey into how the FSA dealt with the collapse of Network Data. Considering the warnings they were given by brokers I think their lack of action borders on criminal neglegence.

  • £33,000 out of pocket 14th April 2010 at 2:13 pm

    And the FSA still don’t insist that networks hold their brokers’ commissions in trust accounts… get rid of them, idiots!

  • Roland Millward 14th April 2010 at 2:03 pm

    The FSA consistently ignored warnings from brokers about the state of Network Data Ltd for many months before they went into administration. They were not interested that brokers were not receiving commission payments. Perhaps they are too thick to understand that if a network can’t pay its brokers that it was in serious trouble?

    An absolute shambles! Brokers have lost more than any consumer is likely to have reason to claim. No help for them.

  • Mark Sutton 14th April 2010 at 1:57 pm

    Perhaps there should be a mortgage network compensation scheme to assist all the AR’s that are significantly out of pocket due to failed networks?