With the number of payment protection insurance (PPI) mis-selling claims finally starting to decline according to the Financial Conduct Authority (FCA), many in the financial services industry are starting to get twitchy about where the ambulance-chasing companies will shift their focus to. Interest-only mortgages had long been rumoured to be the next target, but the FCA’s recent review into the products should ease these fears somewhat as the regulator stated that it had not found evidence of mis-selling – even going as far as to state that the home loans aren’t complex products and do “what they say on the tin”.
The Financial Ombudsman Service echoed these sentiments, saying it had received so few interest-only complaints to date that it didn’t even record them separately.
Yet despite this exoneration, the mortgage industry still needs to prepare itself for a spate of spurious claims according to some quarters. Legal firm Goldsmith Williams has suggested that the recent negligent advice claim against a brokerage concerning a buy-to-let remortgage could set a dangerous precedent. The case may have failed, but with claims management companies already embarking upon advertising campaigns, more complaints are likely to arise. The judge’s remarks in the Flicker v Bateson case should provide reassurance for the industry – as well as underlining the difficulty in conclusively proving mortgage mis-selling – but it is not just a case of the claims being rejected, but the fact that introducers have their time taken up by dealing with such claims. As with any false accusations, regardless of the end result, there is bound to be some collateral damage.
Standards in the mortgage industry have improved significantly over the years as regulation has weeded out many unsavoury elements, but we all still need to be aware of the threat posed by claims management companies. Indeed, recent claims from the Ombudsman that as many complaints originated from fellow brokers as from ambulance-chasing firms shows that the industry has already started to self-police and is acutely aware of the reputational damage posed by poor advice. As a network we have long been aware of our own responsibility to help improve quality and eradicate bad practice and the very existence of middlemen such as ourselves affords another ‘set of eyes’ on the mortgage application process. It is to be hoped that the ongoing enhancement of broker professionalism that the Mortgage Market Review brings will not only raise the reputation of mortgage brokers in consumers’ eyes, but also reduce the number of specious claims.
Process is already regulated to the extent where it is already difficult for brokers to do anything but the best for their clients. And while consumers have rightly been afforded more protection now than ever before, we don’t want to end up in a situation where they have zero responsibility for the financial decisions they make, advised or not. In the case of interest-only mortgages, the regulator is quite right in saying that they are something of a Ronseal product and that borrowers could rightly be expected to deduce the need for eventual repayment, especially when they have been advised to that effect.
Richard Adams is managing director of Stonebridge Group