Rogue Mortgage Broker

Occident

I had an excellent mortgage broker but a friend who has not been so lucky was duped by a rogue broker in 2005. It was her first mortgage, he contacted her by cold calling and all he gave her by way of disclosure was his business card - not one other scrap of paper. In advising and arranging he broke every rule in the book. The firm he worked for ceased trading in 2006 and my friend now has a Home Finance claim with the FSCS. She ended up being sold a mortgage that was totally unsuitable for her.

I have tried to help her as much as I can but there are a number of confusing issues I would appreciate your expertise on.

1) The lender does not appear to have a copy of the application form so my friend has been unable to clarify the FSA registration number used by the broker in the application form. Firstly, the lender said the application form was filed online so was not stored or saved. When told my friend was entitled to have a copy of all her personal data held by the lender no matter how it was filed or who made the application, they said they had the information but not in a form that could be sent out to the customer. Quite frankly I think that is nonsense and they don't have the application form on file. Firstly, they gave a complete nonsense registration number the FSA had no record of. When this was pointed out to them, they gave two more numbers they said would be "recognised by the FSA." No doubt they would but one of them pertains to a company registering in 2006, a year after my friend took out her mortgage, so that company wasn't even in existence when my friend took out her mortage. The lender said one number was for a registered off and the other for a branch - again total nonsense.

The lender is unable to confirm the FSA registration number the broker used. What are the legal implications of this? Will the FSCS form the view that a nationally known high street lender would not have processed a mortgage without an application form, even though they have not retained the form and are unable to confirm from the form the intermediary's details? Also, what are the implications of this for the lender in the event of litigation?

2) The reason the registration number is so important is that at the time of application in 2005, 2 firms were using the same trading name. One was an authorised sole trader, who used the name first, then it was used simultaneously by a limited company. The limited company, however, was not authorised to broker mortgages, only insurance.

3)The trading name is XYX. The limited company using the name at the same time as the sole trader is Company A, an Appointed Representative whose Principal is a nationally-known insurance company. Company A also ceased trading in 2006 and is scheduled to be struck off Companies Register. They did not return accounts after 2005.

3)On the business card it says "Joe Bloggs - Mortgage Adviser". It then gives a correspondence address, not a business address, and it was this correspondence address that was on the Offer of Loan. The adviser and the sole trader used the same correspondence address and the electoral roll shows they both lived at that address. The card makes no mention whatsoever of the name of the sole trader or her business address, which was in another town. Then it says at the bottom in letters so small you need a magnifying glass to read them "XYZ is a trading style of Company A." That makes it look as if the adviser is working for Company A but Company A was not authorised to broker mortgages (confirmed by the FSA). Then it says " I am only authorised to sell insurance products on behalf of Company A's Principal (named on the card)." That may very well have been the case but why did the sole trader not put her name and business address on the business card and what are the legal implications of that? Surely that is an attempt to deceive?

Why would the sole trader want to use Company A's name on the business card and not use her own - "XYZ is a trading style of Miss Sneaky?"

My head is spinning with all this - lol. Perhaps the experts could help me make some sense of it. At the moment the FSCS are 6 weeks into their default enquiries and my friend was asked to complete an application form as soon as they received her initial enquiry. I doubt very much if the adviser or his boss wil reply to the FSCS. They are now both selling juice in pyramid schemes. I would be interested in your experienced views on how the FSCS will view all this confusion.

I know the honest brokers on here won't mind giving me advice as they hate this kind of "broker" as much as the consumers do. It is very confusing. Thank you for your time - it is very much appreciated.

dunstonh

they said they had the information but not in a form that could be sent out to the customer. Quite frankly I think that is nonsense

Actually there is form on this sort of thing. Its what may or may not get classed as a relevant filing system. Some data cannot be output in the same form it was input.

The lender said one number was for a registered off and the other for a branch - again total nonsense.

Not uncomon for that to be the case and remember that mortgage advisers dont have FSA numbers. They operate under the parent company or network. Often you can find a company may have an FSA number but operates under a principle FSA number which is different. You mention in your post that the adviser was an appointed rep so they could easily have multiple FSA numbers. (one for the branch, one for the parent firm and one for the principle - the lender will also have an agent code and sub agent code and its relationship is likely to be with the insurer of which the adviser is an appt rep).

The lender is unable to confirm the FSA registration number the broker used. What are the legal implications of this?

Its largely irrelevant given that the firm is unable to verify if an adviser is authorised or not as they dont appear on the FSA register. The firm should pretty easily be able to find out who the agent was as they will have the commission payment on file and where it was sent. So, whilst one area of their admin may not show it, they can find it if they really had to.

Will the FSCS form the view that a nationally known high street lender would not have processed a mortgage without an application form

Many application forms are data capture forms or the info is input online. In these cases, a proper application form may not exist on paper. Just electronic form. If input online, they should be able to tell who input it.

Also, what are the implications of this for the lender in the event of litigation?

A minor inconvenience that doesnt help anyone but an litigation is not likely to involve the lender other than being a witness. They did not provide the advice and are not liable for any advice given.

hy did the sole trader not put her name and business address on the business card and what are the legal implications of that? Surely that is an attempt to deceive?

Business cards ceased to have the same level of compliance requirements many years ago. There is no longer the requirement to have compliance warnings on them or their status. The home address of the adviser is allowed to be on the card with no requirement to have any of the parent companies address. Especially if the home address is a branch.

Why would the sole trader want to use Company A's name on the business card and not use her own - "XYZ is a trading style of Miss Sneaky?"

Impossible for us to say.

At the moment the FSCS are 6 weeks into their default enquiries

So, very early then. Another year or so to go.

I doubt very much if the adviser or his boss wil reply to the FSCS. They are now both selling juice in pyramid schemes. I would be interested in your experienced views on how the FSCS will view all this confusion.

Its nothing that they will not be used to. By definition, the FSCS deal in cases where the companies have gone and in most cases there will be little or no documentation or help from ex directors etc. Its impossible to call a case when the FSCS look at it.

They are primarily in the advice. Minor rule breaches or rule breaches that had no impact on the sale are irrelevent now. The firm has gone, as have the advisers. So there is no reason to dwell on that. It isnt he remit of the FSCS to do so either. They will remove al lot of what you have said to strip it down to some very basic key points. What was needed, what was wanted and what was sold.

How it was sold then comes into after that but dont go looking for minor errors or inconsistencies as they wont matter in the scheme of things.

I know the honest brokers on here won't mind giving me advice as they hate this kind of "broker" as much as the consumers do.

Too right. We are the ones that have to pick up the bill for those that shirk their responsibilities on to the FSCS.

It is very confusing. Thank you for your time - it is very much appreciated.

One thing you havent mentioned is what the complaint is about.

Occident

Thank you, DunstonH. I know what you mean about networks but the sole trader and Company A had no relationship apart from using the same trading name and had no relationship otherwise. The sole trader was authorised in her own right and Company A was an appointed representative of another company and not authorised to broker mortgages. They had different registration numbers. One was not a branch of the other.

I've kept notes on the claim and would appreciate your comments. The FSCS Senior Claims Manager responded with an application form by return. I am grateful for the insight into how they will see it.


1) The adviser made contact by cold calling, in spite of the fact that the telephone number called is ex directory. Cold calling is banned by the FSA because it exposes consumers to high pressure sales tactics which mean that they end up with an inappropriate or over-expensive mortgage.


2)The adviser discussed all my friend's financial details in the house for sale, which happened to be her place of work (she is a PA to a disabled woman who was selling her the house). At no time did the adviser suggest meeting my friend privately when she was off duty in her own home. Her employer, who is disabled and immobile, was present during all the adviser's meetings with my friend and heard all her personal financial details being discussed. Her employer is a witness to all my friend's dealings with the adviser.


3) She was not given an Initial Disclosure Document

detailing what kind of adviser XYZ was or what services the firm offered, in breach of FSA rules. She received no written information of any kind from the adviser in connection with the mortgage. She therefore did not know from the outset, as she should have done:

whether XYZ offered mortgages from the whole market, a limited range of lenders or a single lender;
whether XYZ gave advice and a recommendation, or just asked some questions to narrow down the selection of products the firm provided information on.
details of XYZ's fees and whether or not the firm received commission from the lender in addition to any fee shewas asked to pay. Her express permission for XYZ to receive both a fee and commission was not asked for, as it should have been, so she did not know from the outset whether XYZ was acting impartially in my best interests or not

All she ever received in terms of paperwork from the adviser was his business card.


4) She was not sub prime borrower, was only offered one mortgage and the adviser brought undue influence to bear on her to apply for the mortgage by emphasising at length the supposed merits of the mortgage. That mortgage product was the worst mortgage in the market and was totally unsuitable for her in that the mortgage plus loan, sold as a package, put her into negative equity from the outset and she became trapped in not being able to apply for another mortgage which would have been appropriate for her when the fixed-rate term was up, not having any equity for another mortgage. The adviser also did not explain that the unsecured loan part of the package would rise by 5 % above the standard variable rate of interest if it became separated from the mortgage. She was a first-time buyer and the adviser took advantage of her lack of knowledge about mortgages to misrepresent an unsuitable product for XYZ's gain. He did not explain to her the high risks of taking out this notorious mortgage.

5) The mortgage takes her beyond retirement age. The adviser did not ask how she would be able to afford the mortgage after retirement. She specifically asked him how she was able to get a mortgage that ran past retirement age and his reply was that it did not matter.

6) XYZ's fees were more than 1% of the mortgage, which no reputable broker would have charged. Had she known the true scale of the combined lender and broker fees from the outset, which he should have given her in the IDD and KFI, she would not have taken this mortgage.


7)She was not given a Key Facts Illustration by either XYZ or the lender. She did not know at the time what a KFI was or that it was a requirement under FSA rules. The first documentation she received from either XYZ or the lender was the offer of loan form the lender. She was therefore prevented from comparing the only mortgage offered with other mortgages that would have been more suitable for her. She did not know anything about the mortgage and repayment details until she received the offer of loan, by which time it was too late to turn back as had she done so both she and the owner of the property would have suffered considerable losses in solicitors and valuation fees.

She [FONT=&quot]was encouraged to take a fixed-rate mortgage for 3 years, at which point the adviser would return to negotiate another mortgage at the end of that term. Exit fees payable on doing this were not explained to her. XYZ had an interest in that advice as a way of procuring a further fee and were not advising impartially in her best interest.[/FONT]

There are other things in the actual claim Dunstonh but I cannot recall them off the top of my head.

Occident

What was needed - a low risk repayment mortgage.
What was wanted - a low risk repayment mortgage
What was sold- a high risk mortgage package that put her into negative equity from the outset. She was not offered any alternatives and was given the hard sell for this product.

She is not and has never been in arrears.

dunstonh

1) The adviser made contact by cold calling, in spite of the fact that the telephone number called is ex directory. Cold calling is banned by the FSA because it exposes consumers to high pressure sales tactics which mean that they end up with an inappropriate or over-expensive mortgage.

If the person was ex-dir then how did they get the number? Probably through lead generation. i.e. the person use a quote portal site and they sold the details to mortgage brokers as per their agreement. So, that wouldnt be classed as cold calling.

2)The adviser discussed all my friend's financial details in the house for sale, which happened to be her place of work (she is a PA to a disabled woman who was selling her the house). At no time did the adviser suggest meeting my friend privately when she was off duty in her own home. Her employer, who is disabled and immobile, was present during all the adviser's meetings with my friend and heard all her personal financial details being discussed. Her employer is a witness to all my friend's dealings with the adviser.

Location doesnt matter. Indeed, there was some govt intervention some years back to encourage workplace financial advice. It never really took off but many do it. Most advisers have done appointments in a range of unusual areas but workplace would not be considered an unusual area.

3) She was not given an Initial Disclosure Document

detailing what kind of adviser XYZ was or what services the firm offered, in breach of FSA rules. She received no written information of any kind from the adviser in connection with the mortgage. She therefore did not know from the outset, as she should have done:

whether XYZ offered mortgages from the whole market, a limited range of lenders or a single lender;
whether XYZ gave advice and a recommendation, or just asked some questions to narrow down the selection of products the firm provided information on.
details of XYZ's fees and whether or not the firm received commission from the lender in addition to any fee shewas asked to pay. Her express permission for XYZ to receive both a fee and commission was not asked for, as it should have been, so she did not know from the outset whether XYZ was acting impartially in my best interests or not

All she ever received in terms of paperwork from the adviser was her business card.

That would be a breach but its largely irrelevant now as no action can be taken against the firm as they no longer exists and the adviser is no longer in the business.

Commission based advisers do not need to get permission to receive commission and the KFI covers off fees and remuneration.

4) She was not sub prime borrower, was only offered one mortgage and the adviser brought undue influence to bear on her to apply for the mortgage by emphasising at length the supposed merits of the mortgage. That mortgage product was the worst mortgage in the market and was totally unsuitable for her in that the mortgage plus loan, sold as a package, put her into negative equity from the outset and she became trapped in not being able to apply for another mortgage which would have been appropriate for me when the fixed-rate term was up, not having any equity for another mortgage. The adviser also did not explain that the unsecured loan part of the package would rise by 5 % above the standard variable rate of interest if it became separated from the mortgage. She was a first-time buyer and the adviser took advantage of her lack of knowledge about mortgages to misrepresent an unsuitable product for XYZ's gain. He did not explain to me the high risks of taking out this notorious mortgage.

This is a key complaint point. If she was eligible for prime or near prime but sold sub prime then that is a mis-sale.

5) The mortgage takes her beyond retirement age. The adviser did not ask how she would be able to afford the mortgage after retirement. She specifically asked him how she was able to get a mortgage that ran past retirement age and his reply was that it did not matter.

How far past retirement age? This one was a big thing a few years back after being quite common for many years. A year or two into retirement with a repayment mortgage is not really a big deal on long term mortgages. Pension lump sums can usually very easily clear them and inflation will erode the value of the mortgage so the final amount at that time. Its certainly a point to raise and in some cases it can be an important point but its one of those things that is not necessarily enough in its own right to result in an upheld complaint.

6) XYZ's fees were more than 1% of the mortgage, which no reputable broker would have charged. Had she known the true scale of the combined lender and broker fees from the outset, which you should have given me in the IDD and KFI, she would not have taken this mortgage.

Whilst some mortgage brokers take really inappropriate fees which are disgraceful, there are actually no rules in place to state what level of fees are acceptable. The fees should have been in the KFI. (noting other comments about receipt of that)

7)She was not given a Key Facts Illustration by either XYZ or the lender. She did not know at the time what a KFI was or that it was a requirement under FSA rules. The first documentation she received from either XYZ or the lender was the offer of loan form the lender. She was therefore prevented from comparing the only mortgage offered with other mortgages that would have been more suitable for her. She did not know anything about the mortgage and repayment details until I received the offer of loan, by which time it was too late to turn back as had she done so both she and the owner of the property would have suffered considerable losses in solicitors and valuation fees.

Lack of KFI is a breach and an important one. Although the decision to still proceed at that time and not make a complaint then but wait until 5 years later is a potential negative against her. Also, did she move the mortgage at the end of the fixed rate?

She [FONT="]was encouraged to take a fixed-rate mortgage for 3 years, at which point the adviser would return to negotiate another mortgage at the end of that term. Exit fees payable on doing this were not explained to her. XYZ had an interest in that advice as a way of procuring a further fee and were not advising impartially in her best interest.[/FONT]

That is an opinion and not supported by facts and will be treated that way.

It is important when dealing with the complaint that you focus on the important issues. Do not dwell on irrelevant issues which are not going to impact on the outcome. The problem with listing too many irrelevant details is that you risk taking away from the important key issues where there real damage was done.

Where things are an opinion or cannot be proven. Mention them but dont dwell on them and dont labour the point.

There appears to be some strong areas here for the complaint but you dont have to come up with options you cant prove. Indeed, opinions which can be proven wrong by the other party or assumptions that are incorrect can actually damage a complaint. In cases where a balance of probability decision needs to be made, the more credible party often wins the complaint. The side that has had opinions or comments shown to be wrong, can often be the less credible party.

Occident

I don't know exactly but I think the mortgage runs 12 years past retirement age.

She didn't know until May of this year what was supposed to have happened with a broker. She only found out when she was discussing mortgages with another friend who was on the verge of applying for one. She was gobsmacked to discover what had happened when she was given "advice." How many people who have never bought a house know what an IDD or a KFI is? or the procedures that are supposed to be followed on brokering a mortgage. He looked the part, he spoke the part and his business card looked official. Hence the reason for the 5 year delay. She was a first time buyer who was duped by an unscrupulous adviser and the law and rules are there to protect vulnerable consumers.

She was unable to move her mortgage after 3 years as she was in negative equity and remains so to this day.

Thank you, Dunstohn. I feel she has a good case so we will just have to wait - and wait - and wait - to find out!

dunstonh

I don't know exactly but I think the mortgage runs 12 years past retirement age.

Thats a significant overrun and definitely worth highlighting as a key point.

Occident

There is something else about all of this I am unclear on. The role of the lender, who has not exactly been a clean potato in all of this and has told lies to my friend in a bid to cover their backs.

Firstly, they told my friend that no application form was formed as the adviser applied online. Then they told her there was an application document but it was stored in such a way that it was not in a form that could be issued to a customer. If they cannot extract the information in a readable form, how can they prove they checked affordability? I suspect they have lost the electronic file. Secondly, they definitely cannot confirm the FSA number the adviser used in the application. She has tried 3 times to get confirmation of this. The first time they gave her a number that doesn't exist. The second time they speculated it was one of two possible numbers which the "FSA would recognise." The FSA would of course recognise them but that doesn't mean the adviser used either of them. It couldn't have been the second number because the firm using that number didn't come into existence until a year after the mortgage was taken out. So the lender has been grasping at straws. When my friend pressed them again for information on the FSA number the intermediary used and information on the application form they didn't reply and that was a month ago. So the lender has no authenticated evidence of the FSA registration number of the adviser and no proof they checked affordability. I wonder what the legal implications of that are for the lender. They have definitely been trying to cover up and haven't been making a very good job of it.

dunstonh

If they cannot extract the information in a readable form, how can they prove they checked affordability?

What they probably mean is that they can view it on screen as a data capture form but not output it as a clear record of data for consumer use. Quite a lot of the data capture forms that get output by providers are not exactly consumer friendly.

Secondly, they definitely cannot confirm the FSA number the adviser used in the application.

That used to happen a lot on the Full regulated advice side back in the late 80s and early 90s. It may happen on mortgages as there is no FSA register for mortgage advisers.

The second time they speculated it was one of two possible numbers which the "FSA would recognise." The FSA would of course recognise them but that doesn't mean the adviser used either of them.

Its possible to have multiple FSA numbers. Networks have the network number, then the individual firm number and if you have a full authorisation adviser (and not a mortgage/insurance only adviser) then there will be an individual FSA number as well.

It couldn't have been the second number because the firm using that number didn't come into existence until a year after the mortgage was taken out.

The "new" firm may have done an agency transfer if they were linked to the old firm.

I wonder what the legal implications of that are for the lender.

Probably very little, if anything.

Occident

Thank you again - you have been very helpful.

The issue of the numbers and firms is complex.

Company A working under trading name Z was a Sole Trader authorised in her own right to broker mortgages. The adviser who advised on my friend's mortgage lived with her. He advised on and arranged the mortgage. The Sole Trader ceased trading 4 months later.

Company B also working under trading name Z was a Limited Company who was an Appointed Representative of a major insurance company and was authorised to broker insurance only - there was no connection between Company A and Company B. Ceased trading in 2006. My friend got that information from the FSA.

Company C who now has the trading name took it from Company B when a director of Company B started Company C. Company C didn't exist when my friend took out her mortgage.

The two numbers quoted by the lender were Company A and Company C - no connection between them.

This is the strange part. The adviser only gave my friend his business card - nothing else. On it was:

Company Z

Mortgage Adviser

Joe Bloggs

Correspondence Address
Telephone Fax

(Then in letters so small you cannot read them without a magnifying glass)

Company Z is a trading name of Company B. I am authorised only to sell insurance products from Company B's Principal.

Nothing about mortgages, nothing about the Sole Trader - only about Company B who weren't authorised to broker mortgages. If that isn't confusing, I don't know what is. The FSCS has a copy of it.

There is a bit on the lender's intermediary online application form where they must put their FSA number and the bank has to sign to say they have checked it. I think the lender's procedures are sloppy to say the least. They should be able to pinpoint the FSA number for every mortgage application. I wonder what happens with data capture if they are ever asked to produce it in court. I doubt they would tell a judge they have the information but not in a form they can produce in court!

Trollfever

I think the lender's procedures are sloppy to say the least.

In 2005 a lot of mortgage lenders had sloppy procedures.