24/05/2010 by Bradders.

The Financial Ombudsman Service is receiving more complaints than ever and it received nearly a million complaints in the year to March.

The Ombudsman is bracing itself for over a million complaints this coming year.In order to deal with the surge in work, the Ombudsman has increased its staff numbers by about a third over the last few months. Industry sources still believe that although there is no alternative to the Ombudsman scheme, there is still a need for change. They believe that staff are not properly trained, and the scheme is slow, erratic and inconsistent.Over the coming months the service will be severely tested as they are currently getting more than 3,500 complaints each working day. The increasing number of ppi complaints is only adding to this burden.That said the Ombudsman managed to resolve over a 166,000 disputes between consumers and financial institutions and compensation was awarded to more than 50% of complainants.PPI is still the most common reason for a complaint and basically 3 out of every 10 new cases is a ppi complaint which is a 58% rise on the year before.

This has also meant that insurance disputes are on the increase although PPI is the main contributor to this.. The Financial Services Ombudsman was set up in 2000 with the mission to settle 25,000 disputes a year. This year it says it’s expecting to resolve 200,000 disputes.

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17/05/2010 by Bradders.

The wrong doings of many brokers over the last five years will soon become apparent as borrowers realise the have been missold mortgages. The FSA have been implementing regulations over the years to combat this bad practice but the full extent of the problem is likely to emerge as borrowers start struggling with repayments especially if interest rates start to rise.The bad practice amongst brokers is not a new issue and has been going on for some time.

A few years ago The Loan Company (trading as Greenhill Finance) was fined £31,500 for failing to make proper affordability checks on the sub-prime mortgages it was selling.Next Generation Mortgages was also fined £10,500 for failing to make proper assessments and failing to explain mortgage risks properly.But if one looks at those figures in another context it was worthwhile for the brokers to do this because at the time they could reasonably expect 0.5% to 2.5% commission for each mortgage they sold.The adverse credit mortgage market – the more common name for UK sub-prime mortgage products – offered higher commission rates because of the higher interest payments, and therefore profits, usually provided by these vehicles.

A quick bit of maths show a £200,000 sub prime mortgage was worth £1000 – £5000 commission, minimum, per sale.So the benefits of flouting FSA guidelines could easily have offset the risks of being caught.Even the worst sharks that were eventually closed down seemed to have got away with murder.

It was no surprise that the company directors of such establishments simply cashed in their profits and laughed all the way to the bank. This was in light of the fact that some consumers were misled or even had missold mortgages.However,help could be at hand for anyone who believes they may have been missold a mortgage. A mortgage audit can be used to prove if a missale has occurred and potential compensation can be awarded.

The good news is that even the firms that have gone to the wall compensation can be awarded through the Financial Services Compensation Scheme.www.missoldmortgages.org.uk

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17/05/2010 by Bradders.

Payment protection insurance will no longer be allowed to be sold alongside the product for which it is intended, the Competition Commission has announced this week.

After many months of deliberation, the Competition Commission has followed through on previous proposals to prohibit lenders from cashing in on a captive audience by selling payment protection insurance at the same time as the loan or credit card the customers are taking out.

Point of sale PPI puts the consumer at a disadvantage, because they are often not given all the information necessary about the product, and are not given a chance to shop around. Many have even been missold ppi which was not appropriate or they did not need.

All forms of payment protection will be banned at point of sale, with the exception of retail PPI, such as repayments for shopping through home catalogues, which accounts for about 2.5 per cent of all PPI premiums.

Through its investigations into the PPI market, the Competition Commission said today that it has “concluded that the benefits of a package of remedies including the prohibition, by introducing greater competition and choice and lower prices to the market, will outweigh the disadvantages, in particular the potential inconvenience to some customers.”

Peter Davis, inquiry chairman and CC deputy chairman, said: “We found that many customers would place very significant value on being given the time and space to choose the right PPI product – or indeed to decide that PPI is not right for them. We also found that a significant number of customers appreciate the convenience of buying PPI instantly at the point of sale of credit.

“Overall we concluded that PPI providers are overstating the loss of convenience that would result from the introduction of a prohibition on selling PPI during the credit sale. All customers of course will appreciate the lower prices for PPI and the greater choice we expect to result from more competitive PPI markets.”

Commenting on the CC’s decision, Tim Moss, head of loans and debt at moneysupermarket.com, said “The PPI industry has suffered at the hands of a few unscrupulous lenders,and has become a “cash cow” for the banking industry, resulting in instances of misselling for many.

But, he added, “we need to be careful not to throw the baby out with the bathwater - PPI is a useful product for many consumers giving them peace of mind at a time of financial uncertainty.”"Consumers should still consider protecting their repayments, and shop around to find the best solution for them, which may be through specialist insurers, rather than from their loan provider.”Barclays, whose complaint was supported by Lloyds Banking Group and Shop Direct Group Financial Services Ltd, said it was disappointed with the Commission’s decision. “We know that PPI is a product that is of value to many people. In these times of economic uncertainty, adequate financial protection is more important than ever,” a Barclay’s spokeswoman said. “We still maintain that to prohibit PPI being sold at the point of credit sale and for a fixed period afterwards will limit, rather than enhance, customer options and will result in customers being exposed as unprotected.” Consumer organisations have complained for some years about people being mis-sold ppi polices. Actions already taken by authorities include: ·         In October last year, mortgage lenders and insurers agreed to refund £60m to customers whose premiums for mortgage payment protection insurance went up in 2009 ·         In September 2009, the Financial Services Authority (FSA) told banks and other lenders to compensate customers who may have been mis-sold payment protection insurance when selling “single-premium” PPI policies alongside unsecured personal loans ·         At the same time, all financial firms were told to reopen 185,000 old complaints about PPI they had previously dismissed ·         In May last year, the FSA told the banks, and other lenders who sell PPI, to immediately stop selling one version of the insurance, called single premium PPI, where the premiums are added onto the loan as an upfront lump sum.  

Brad Martin of Claims Management Company Claimline UK said “For absolute brass neck the award must go to Barclays with their pseudo caring attitude regarding their customers best interests.Anyone who has been sold Payment protection insurance should think long and hard if it is something they really wanted or needed or if they have cause for a ppi complaint”

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13/05/2010 by Bradders.

Thousands of borrowers will be able to claim compensation after the Financial watchdog the FSA fined a lender for hammering those in arrears with excessive charges.GMAC which was one of the major mortgage providers has been fined a huge £2.8 million by the Financial Services Authority.Customers who had fallen behind with payments have been treated “unfairly” by GMAC, say the FSA and now the mortgage lender must repay up to £7.7 million, plus interest to more than 46,000 borrowers.The FSA have said that this case “sets a precedent” which opens the door for others that may have been treated with such disregard and may also be entitled to similar compensation in the future.The FSA found four key failings with GMAC:

• Excessive and unfair charges

• Poorly-designed repayment plans

• Inadequate training of mortgage staff

• Repossessing before considering the alternatives

The FSA have warned that action will be taken against those lenders that treat struggling borrowers unfairly. The regulatory body has identified five lenders that have broken the rules but GMAC is the first example of action being taken and public censure.CompensationThere are three arrears fees for which GMAC will have to pay compensation:

• Non-direct debit fees which are usually charged when you pay by cheque or bank transfer to cover administration costs which are levied on customers when they did not make a payment. This equals an average refund of £117

• Early repayment charges which are usually applied when you pay off a mortgage before the end of an introductory period. These charges are applied to the portion of the loan in arrears as well as the whole loan meaning customers paid twice. This equals an average refund £14

• Borrowers have also been charged part of the solicitor’s instruction fee which was more than the actual cost. This equals an average refund £45

The FSA is unsure of the total number of customers who have been affected, however, it is thought to be somewhere between 46,000 and 114,000. The FSA only has figures for the total number of individual charges that need refunding; this is currently at 114,000. Still, many homeowners will be entitled to multiple refunds.GMAC released a statement to say, “We apologise to customers affected. We have established a customer redress programme. Whilst our arrears charges were in line with the market, in hindsight, we fully accept liability for certain fees. Our estimates of the costs were not proportionate to the additional administration required. We will be writing to customers who incurred these charges and will re-credit the charges plus interest.”www.missoldmortgages.org.uk

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11/05/2010 by Bradders.

A recent ruling by the Financial Ombudsman Service has ruled that home owners can obtain financial compensation from mortgage lenders/brokers if they have failed to provide the borrower with suitable advice. Home owners who begin such claims early enough may even be able to avoid repossession.

Back in the boom years of the last decade, lenders were approving mortgages at record rates. Mortgage brokers were reaping the benefits through their commission structures. In the rush to provide mortgages it appears that these institutions may have been professionally negligent and missold mortgages.

Lenders and brokers are regulated by the Financial Services Authority (FSA). Their rulebook for mortgage advisors (Mortgage and Home Finance: Conduct of Business - MCOB) provide that advice must be “suitable for that customer”. Many people have been sold inappropriate or unaffordable mortgages and in the current climate are experiencing difficulties in making their repayments. Repossessions are on the increase, but can be postponed or even avoided if a mortgage mis-selling investigation is undertaken. The Financial Services & Markets Act 2000 provides that breaches of the MCOB rules are actionable at the suit of a private person who suffers loss as a result. The FOS ruling potentially opens the floodgates to a huge number of claims against lenders and brokers for failing to follow the FSA guidelines.

Examples can include:·         Where housing association tenants who had a fixed rent for life were persuaded to purchase the property, but were not advised what would happen when the attractive discounted rate set up on the mortgage ended.·         Where the broker dealt with certain aspects of the advice / application superficially·         Where a client has been sold a mortgage with a fixed rate for a specified period of the term of the mortgage (i.e. the first 5 years of a 25 year mortgage are at a fixed rate whilst the remaining years are at a variable rate). If the monthly repayments on the fixed rate are so high that the borrower is pushed to their financial limit and would have no chance of paying the variable rate in the future and so is, in effect, borrowing beyond their means.·         If the borrower has been told that when the fixed rate ends they should remortgage with another lender to get a new fixed rate, due to property prices increasing this would be achievable.If the clients were not advised of the inherent risk in this approach they may not have been given suitable advice. They may not have considered that the value of the property could fall leading them into negative equity, making remortgaging not possible (especially in view of the credit crunch) and therefore the variable rate unaffordable 

An area of major concern is the Right to Buy purchasers who have received particularly poor advice from advisors

Due consideration needs to be given as to who the claims should be directed against in the event of missold mortgages

It all depends on who sold the product. If it is sold by the sales force of the product provider then obviously the claim lies against the lender.
If it is sold by a broker then it lies against him. If the complaint is not dealt with by the broker adequately the case can be refered to the FOS which has the explicit power to order the firm to pay for distress and inconvenience as well as financial loss. If the broker is insured and the claim is notified to insurers then they should deal with it. If the broker goes bust but was insured and the insurers don’t avoid cover e.g. for late notification then the claimant can recover against the insurers under the Third Party Rights against Insurers Act 1930.

In the event that a broker goes out of business or a lender has gone into liquidation, as they are both FSA regulated, clients can use the Financial Services Compensation Scheme to pursue any claim. Compensation can be sought for financial loss only.To quantify if a mortgage has been missold a mortgage audit needs to be undertaken and if found to be the case compensation can be sought.www.missoldmortgages.org.uk

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09/05/2010 by Bradders.

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.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 missold mortgages 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):

 - Turnover: not more than £6.5 million

 - Balance sheet total: not more than £3.26 million

 - 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”.

It’s coming to light now that certain unethical mortgage brokers and financial advisors were taking advantage of their clients with their ‘professional’ advice. With the prospect of increasing their already substantial commissions they made recommendations to their trusting clients on mortgages that would benefit them more than the client.Although this sharp practice has been going on for years it is only within the last decade that things got really out of hand.

As far back as 2004 the Financial Services Authority introduced new regulations to curb missold mortgages. However the lure of easy money from their unsuspecting clients proved too great and many people were still sold mortgages that they could not afford or were even suitable.

However, all is not lost as these very rules can be used to prove that the broker gave the wrong advice and if proven you are entitled to compensation.To prove conclusively that a missale occurred a mortgage audit needs to be conducted. This would entail a professional mortgage broker forensically going through the sales procedure. They would look to see what advice the broker gave and if it was in the clients best interests.

For example was the entire market trawled to see if the best rates were being offered or if the terms of the mortgage were suitable for the borrower? Were the clients best interests satisfied in terms of affordability or was there a recommendation to falsify income to be eligible for that mortgage. Are you now in,or facing financial hardship due to the mortgage advice given? If anyone believes that they were give bad advice regarding their mortgage, commissioning a mortgage audit will put them on the road to getting them back to where they would have been without this advice.

www.missoldmortgages.org.uk

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08/05/2010 by Bradders.

A recent decision by the Financial Ombudsman Service for a householder who had his home repossessed after being mis-sold a hefty mortgage could set a precedent, preventing others from losing their properties or getting recompense.An estimated 75,000 families this year (against 40,000 last year) will lose their homes, according to the Council of Mortgage Lenders (CML).

However, many who face the prospect of vacating their homes could be helped by rules covering “suitable advice” for borrowers, which is contained in the handbook of the Financial Services Authority (FSA)In this recent decision the homeowner struggled to repay his mortgage and his mis-selling case was taken up by the Financial Ombudsman Service, who upheld the complaint.

Despite the case being taking on at a late stage by the FOS he was subsequently repossessed, but he will receive compensation. For borrowers who begin cases at an earlier stage they may well be able to save their homes too.As a housing association tenant, the homeowner had the valuable promise of a rent fixed for life. However, a mortgage adviser persuaded him to buy the property and failed to consider the affordability when the attractive discounted rate (set up on that mortgage) ended. The homeowner was subsequently repossessed and had to move out of his home. A formal complaint was then lodged with his mortgage adviser and ultimately the case was brought to the FOS.

It is now apparent that more claims of this kind are likely to emerge as there are potentially thousands of missold mortgages. The main source of optimism for those in a similar position lies deep within the FSA’s rulebook for mortgage advisers, Mortgage and Home Finance: Conduct of Business (MCOB).This states mortgage advice must be “suitable for that customer” and that advisers “must make and retain a record” of it being suitable; this is known, crucially (and rather technically), as complying with section 4.7. Breaches of the MCOB rules are “actionable at the suit of a private person who suffers loss as a result”, under section 150 of the Financial Services and Markets Act 2000.

Some industry experts are confident that such cases would succeed as there is a fundamental obligation under MCOB rules. This would mean that thousands of borrowers in a similar situation could use these rules to retain ownership.Others are a little more cautious and feel it would depend on individual circumstances but agree that there is merit in considering MCOB rules.  

Although there is concern that some borrowers might try to exploit the MCOB rule without good cause, there appear to be many cases of people being mis-sold mortgages they could not afford. A Citizens Advice report from 2007 ‘Set Up to Fail’, detailed the sub-prime lending market. The charity’s repossession clients had often found themselves with inappropriate and unaffordable mortgages and secured loans, and people buying council houses received “particularly poor advice”. One case highlighted a Welsh couple with a disabled child who were persuaded to take a second mortgage on their home.

The loan wiped out their equity and meant £1,300 - 87% - of their £1,500 monthly income went on mortgage repayments.”The MCOB rules are there for a reason, to protect consumers,” says  Sue Anderson from the Council of Mortgage Lenders. “Consumers have ‘the ability and right’ to rely on these regulations if they believe they have not been dealt with correctly,” she says. Although the Ombudsman’s decision found in favour of the homeowner, the issue remains complicated. The FOS is charged with restoring people, ‘as far as possible’, to the situation they would otherwise have been in - and that is not straightforward in circumstances such as these.

It could work out for example that you are no worse off for taking a missold mortgage, as the property value increased over this period. This would mean that no compensation would be offered.However, in the current climate the Ombudsman has to work out levels of compensation for people who have not been protected by the rise in property values.Have you got a potential case?• Were you encouraged to overstate your income by the broker?• Did your mortgage adviser not explore affordability with you, or do you feel you were dealt with in a superficial way. Advisers should rely on past figures for income and outgoings.

If they don’t have them, then alarm bells start to ring. • You will have extra grounds for a case of mis-selling if your mortgage stretched beyond your retirement date and your adviser did not explore that as an affordability issue. • You’re case might be based on  mortgage “misrepresentation” which might be arguable if you were given a very hard sell, or only told everything good about the product and given no information about what would happen when interest rates went up. If misrepresentation is argued successfully, it could be possible for the contract to be rescinded - as happened in a case in the 90’s 

There are many other reasons for a missale and a mortgage audit by a claims management company that specialises in missold mortgages will prove if a missale has taken placeOnce this has been established a claim will be made against the advisor who sold the mortgage and if the response is unsatisfactory the case will be packaged and taken to the Financial Ombudsman Service for a ruling. If there is a repossession order in place the FOS would request that the repossession proceedings are put on hold during any investigation.

It should be noted that even if a mortgage began before the MCOB rulings in November 2004 the rules could still apply. www.missoldmortgages.org.uk  

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07/05/2010 by Bradders.

As we progress through the new decade it becomes apparent what a disaster  the last decade has been financially for the majority of people. What started out as a flag waving money for all environment has bitten us on the proverbial backside! 

It should not really be a surprise as things that are too good to be true generally are. The days of easy money have come to a grinding halt and there is a lot of belt tightening currently happening. During the boom years of the last decade it would seem that an awful lot of misselling was taking place but everyone was too busy counting their money to take any notice. The major financial institutions were filling their pockets with the profits made from the controversial payment protection insurance.It’s only now that the great British public are waking up to the fact that they were duped into buying this and there are now ppi complaints by the thousands every week. 

It’s only now that it is also coming to light that certain unethical mortgage brokers and financial advisors were also taking their clients to the cleaners with their ‘professional’ advice With the prospect of increasing their already substantial commissions they made recommendations to their trusting clients on mortgages that would benefit them more than the borrower. 

Although this sharp practice has been going on for years it is only within the last decade that things got really out of hand. As far back as 2004 the Financial Services Authority introduced new regulations to curb missold mortgages. However the lure of easy money from their unsuspecting clients proved too great and many people were still sold mortgages that they could not afford or were even suitable.However, all is not lost as these very rules can be used to prove that the broker gave the wrong advice and if proven you are entitled to compensation. 

To prove conclusively that a missale occurred a mortgage audit needs to be conducted. This would entail a professional mortgage broker forensically going through the sales procedure. They would look to see what advice the broker gave and if it was in the clients best interests. For example was the entire market trawled to see if the best rates were being offered or if the terms of the mortgage were suitable for the borrower? Were the clients best interests satisfied in terms of affordability or was there a recommendation to falsify income to be eligible for that mortgage. Are you now in, or facing financial hardship due to the mortgage advice given?   

If anyone believes that they were give bad advice regarding their mortgage, commissioning a mortgage audit will put them on the road to getting them back to where they would have been without this advice .www.missoldmortgages.org.uk

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04/05/2010 by Bradders.

Pressure is being applied to the major banks by the city watchdog as it finally shows its teeth wit a promise of biting. Outraged by the way the major banks have mishandled complaints, at least two of the culprits could be in line for a major fine. 

Dear CEO letters were sent out to the major institutions recently in an effort to thwart this cynical approach to consumer’s complaints but to no avail. At this point in time there has been no naming and shaming but it is widely believed to be Lloyds that’s in the firing line for the majority of the criticism but many CMC’s feel it could equally be Barclays. 

Lloyds has been getting a disproportionate amount of complaints from its 30 million customers. As many as 500,000 Lloyds customers are estimated to have complained last year but a far smaller number have taken this complaint on to the Financial Ombudsman Service. This is where complaints need to go once the bank has rejected the complaint which they invariably do. In the second half of last year about 20,000 complaints against Lloyds went to the FOS which is about five times the number of complaints relating to either HSBC or RBS. Barclays has around 10,000 complaints going to the FOS. 

The majority of these are ppi complaints which relates to the overpriced insurance policies that are force fed customers when they take out a credit agreement. Ironically many of these complaints,(up to 90% for some Lloyds subsidiaries) are ultimately found in favour of the customer. This would suggest that Lloyds are rejecting claims irrespective of their merits. 

Brad Martin of claims management company Claimline
UK said “I’ve been banging the drum for over a year that complainants have to be tenacious and not take no for an answer. It’s obvious that in the majority of instances the seller will always exclaim that this was a fair and just sale that followed all the procedures as laid out in the FSA guidelines.However, on the numerous occasions that I have heard the audio recordings from the sales calls it’s apparent that the majority of people do not fully understand what they are purchasing. You can almost visualise the head shaking but the shoulders shrugging when asked if they have any questions. I sometimes liken it to a flight emergency demonstration; everyone is just waiting for the movie to start.  

It will now be interesting to gauge the banks response after the financial regulator raps their knuckles yet again. The whole industry is mow bracing themselves for the next big misselling scandal which is missold mortgages but hey that’s another story.   

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