Brokers and lenders should not fear the growing trend of claims management companies encouraging consumers to claim mortgage compensation, experts say.
A significant number of ‘CMCs’ that once handled payment protection insurance claims are moving into other areas, such as mortgages. This is being fuelled by the FCA’s announcement this year of the final PPI claims deadline in 2019.
CMCs have begun to hunt for claims in areas including self-cert loans, interest-only and endowment mortgages and general bad financial advice. They are also encouraging claims from sub-prime and debt consolidation borrowers and those whose mortgages have been securitised.
For example, the website of Pure Claims Limited, trading as claimyourmortgage.co.uk, says: “If you paid an unreasonably high fee to your broker, were unaware of how much it would be, or if it was added to your mortgage without you knowing, meaning you are paying interest on it, you could claim.”
According to John Charcol senior technical director Ray Boulger, both brokers and lenders could face claims through CMCs.
He says: “If they have the choice of lender or broker, they will probably pick the company with the biggest pocket. But, if the client is using a broker and is complaining about the advice, they’ll probably claim from the broker. It depends on what they are complaining about.”
Brokers have concerns that CMCs could encourage vexatious or false claims, creating extra costs for intermediaries and the Financial Services Compensation Scheme they part-fund.
Lentune Mortgage Consultancy managing director Stuart Gregory says: “Following the PPI scandal, and the establishment of the ‘red line’ from the FCA on claims for that, the claims management companies need another target.”
Perception Finance managing director David Sheppard says: “When people see pound signs, they’ll try and see if they can get free money.”
But experts think the problem will be quite contained. Association of Mortgage Intermediaries chief executive Robert Sinclair says: “There will be an attempt by firms to attack certain aspects of the mortgage market. So far, these have not got very far.”
He adds that some claims will be successful, but says: “I don’t see fundamentally systemic issues coming out of this, where they will find a rich vein of liability to go at.”
Maxwell Moore director Jonathan Moore says: “There has been misselling of mortgages to a degree, especially prior to the credit crunch, but I am unconvinced it can be turned into a widespread market in the way PPI has been.”
Mortgage Strategy contacted Pure Claims and other CMCs but none responded.