Being sued by mortgage broker??

Milky_Mocha

Hi
I'm posting this on behalf of a friend and her husband. They took out a mortgage approx 21 months ago and recently during a financial health check found out that they were paying over the odds for mortgage protection insurance - approx £500 per month which covered life insurance and unemployment only! They were naive at the time and didn't shop around. They've now found a better deal - approx £250 for life, unemployment, sickness and critical illness. They've cancelled the old one (About 5 months ago) and have been with the new cover since with no problems.

They recently got a call from the broker who is threatening to sue them for £4,000 because apparently they had a 2-year tie in period with him for the insurance! Bear in mind the insurance company themselves have no issue with their switching.

Are brokers able to tie in like this? It reeks of injustice to me. The mortgage itself is a 5-year fixed which they are still paying with no issues.

McKneff

They need to look at the T&Cs of their old MPI regarding the 2 year tie in period.

Sounds like they went into it willingly so presume they cant go down the misselling route.

Comyface

OMG! I have no idea if that's true, but I wonder if the broker has had a 'clawback' of his commission? Have they got any documents from the start of the policy which may shed any light?

Surely can't be true, especially if the insurance co. had no probs with it.

Hope someone else can come on and say it's not true! How unfair!

opinions4u

It doesn't sound right to me, but check the paperwork just in case! Perhaps a fee was waived in lieu of commission that is now being clawed back. They may be asking for payment of the wiaved fee.

First line of defence is attack: I'm sure you'll be able to suggest that the policy was mis-sold in some way and you will be taking appropriate action in the near future unless they back off.

Did the policy meet the needs of the client, and were those reasons properly documented?

nat_c84

When I was a mortgage broker, it wasnt a tie in with the insurance as such but we used to give a reduced fee if you went with the insurance we recommended, therefore if you cancelled it within a certain period (4 years with the company I was with) then they were entitled to retrieve the additional 1% discount they had given on the fee

I would assume it was something to do with this

unite79

This would be an unfair contract term.

Additionally, What an expenxive policy £500 per month!

Dan_1976

The tie in may be with the broker, he would have detailed this from the start.

Its a little off but it does happen. Its seems high because of the premium size. Normally that may have cost £40 a month.

They may have been waived a fee or something if they agreed to keep the policy for two years.

The insurance company wont mind as they will get the commission back.

They need to check what they signed. If they did then they have to pay up, if not then he can jump!

nw_man

£500 per month for an ASU and possibly life insurance plan ?

Where do they live ? Buckingham Palace ??

dunstonh

If you agree a fee with the adviser but then use commission to offset that fee then its only right that if there is a clawback that the adviser then comes after you to collect the remainder of their fee. Indeed, from 2012, this will become the most commmon remuneration method. Its currently called customer agreed remuneration but will have a new name before then.

So, the concept is sound and the reasons are sound.

However, there are a minority that abuse this system. They dont make the fee agreement clear. i.e. how much is the fee and they take more commission that the fee. Then they try to get ALL the commission back and not just the difference. That is considered totally unjust and unfair and its not enforceable in most cases. They just threaten and hope you give in.

The course of action here is simple

1 - Ask the adviser for the fee agreement that they signed agreeing the fee payable.
2 - Ask the adviser for the commission that has been paid to date and how much clawed back (its pro rata so it wont be a 100% clawback.
3 - Ask the adviser for how much he/she wants
4 - Ask the adviser how much commission was paid at the start.

Put that in writing, keep a copy and ask for a written response.

When the response comes back check the figures on the commission paid. If the commission taken is higher than the fee stated then they have committed fraud. If no fee has been stated and no fee agreement exists then they cant go to court to get the money as there is no document stating how much money was owed. If the figures dont add up then you can have him/her on that.

If a fee agreement exists and the commission taken equals the fee and a clawback leaves a shortfall then its totally valid and fair and should be paid and a small claims court would side with the adviser.

TEDDYRUKSPIN

Trust dunstonh..... he knows what he is saying....

Only would I be the only person to complain about him! LOL...

Joking aside. He is complete correct.

koexelek

In my opinion, and broker who imposes conditions like this does not have confidence in the products they are selling.

If you know they are the best value for money, why would you have to worry about your customer rebroking them elsewhere

If you have a good relationship with your clients, they will come back to you personally if they are struggling with the premiums, so that a good solution for both parties can be found