Mortgage broker scam?

zara13

I am a first time buyer and my brother recommended a mortgage advisor...he sorted out my mortgage fine and I am aware that he got paid by the lender for referring us.

However, when he tried to set up life insurance for us...I was open to it thinking he would find us a good deal. When the papers came through though for the insurance, I decided that the price wasn't really what we could afford so I phoned the insurance company to cancel the policy.

My mortgage broker consequently phoned me in a huff saying you cancelled it so I'm going to charge you for my time. He has billed us for £350...not something as first time buyers and a young family can easily afford!

The thing is in his bill he has included finding us a mortgage and sorting all that out (he's been paid by the lender for that)....not just the insurance things.

Also at no point has he showed us any terms or conditions of his service or made us aware that this would happen at the start.
I have been reading online that they are supposed to open and clear about costs from the beginning....

Anyways...does anyone know where I stand with this...is he right to charge us this amount? Should I pay and try to forget about it or contest it?

ACG

He should have given you an IDD document (sets out who they are/what they do/charges etc).

There may also be a different document you signed to say if the policy comes off the books your liable for any commission clawed back.

For the mortgage:
He may have charged a fee and/or been paid commission. He may have waived this fee because you were taking out insurance... he may not have though.

You need to get the IDD and ask him for evidence of what you signed to say if you cancel the policy you will have to pay a fee.

From a brokers point of view, he has done some work been paid commission and then had it clawed back because you changed your mind. Why would you agree to the premiums and then decide its too much? - i dont need an answer to those, just something to think about it. I hate it when this happens, thankfully it doesnt happen too often and i try to take it as part of the job.

Senior_Paper_Monitor

He should have given you a client agreement very early in the process - many of which will include a clause that should you cancel any insurance he can charge you any commissions 'clawed back' from him by an insurance provider paying back. I quote the applicable term from our standard network agreement ...


If we arrange for you a contract from which we receive initialcommission and subsequently you cease to pay premiums which results in usrefunding the commission which has been paid to us, we reserve the right torecover from you an amount equal to the amount we have had to refund withoutthe need for a separate fee agreement. The amount recoverable and thetimeframe over which it is recoverable are dependent on the product chosen. Further details of the amount and timeframe will be notified to you priorto the conclusion of the contract in the Suitability Report or Statement ofDemands and Needs Letter we will send you.

.... and if he has given you something similar then he is entitled to charge.

We actually insisted with our network that we remove the clause from our client agreements - it has always been our policy to take insurance commission payment on a non-indemnity basis (we are paid our commission monthly as premiums are paid) which in turns mean we have a pressure on us to ensure that we provide policies that are affordable and suitable in the long term (and we don't lie awake at nights worrying about what money is going to be clawed back next week).

dunstonh

We actually insisted with our network that we remove the clause from our client agreements - it has always been our policy to take insurance commission payment on a non-indemnity basis (we are paid our commission monthly as premiums are paid) which in turns mean we have a pressure on us to ensure that we provide policies that are affordable and suitable in the long term (and we don't lie awake at nights worrying about what money is going to be clawed back next week).

I agree with non-indemnity and frown on those companies that don't do clawback correctly. However, it should be noted that on the IFA side for non-insurance products, agreeing a fee and then collecting the fee via that product is the norm and a requirement from the FCA (other than paying the fee directly). So, if done correctly, it can be cost effective and if someone does cancel, then the firm has every right to get the difference back.

If it is one of these "you will pay our clawback whatever it happens to be" style agreements with no amount determined in the agreement, then I do not like those and I suspect that they would not hold up in court.

Mortgage broker scam?

No. It is not a scam.

zara13

Ok thank you...so I should contact him and ask for evidence that I had agreed/been shown something to say I would need to pay him if I cancelled.

I am a new mum and a first time buyer so when he came to tell us of the premiums I think he tried to take advantage of my naivety as he tried to get us to set up some other type of life insurance as well and wasn't very clear about the costs.

I am presuming that his reply is not going to be very courteous as on the phone when I said I was not aware that he would charge if this happened he replied well I don't work for nothing in a not very nice tone!

I'm just worried that he knows where I live and he even sent a copy of the bill to my mum! (my late father used his services as well as my brother). What can he do if I don't pay? as I am very certain he did not provide us with any terms of service.

Senior_Paper_Monitor

Sending the bill to your mum is flagrant breach of data protection - error 1.

If he provided the appropriate Initial Disclosure Document and/or Client Agreement establishing the right to do so then he could take a court action to recover. If he didn't he can't. If he didn't, then the mention of a formal complaint should frighten him off.

zara13

I have drafted a reply to my mortgage broker....do you think this sounds reasonable? -

XXXX,

Regarding your bill, the amount is surprisingly high considering you have been paid for arranging the mortgage by the lender already.

I must state that as far as I am aware you did not provide an Initial Disclosure Document or some form of client agreement up front, where it stated that I would need to pay you if I cancelled the policy. If this had been provided and you had been more clear on the terms and conditions of your service I would not have readily cancelled the policy.

Nevertheless, I appreciate the work that you did completing the applications and I would be willing to pay what Scottish Provident were going to pay you for the life insurance which I believe is £263.

If possible could you please provide me bank details that I could pay the amount into as I do not have a cheque book.

I hope you find this amount reasonable, as I believe I have grounds to make a formal complaint for firstly not having an IDD provided and secondly for copying and sending the bill to my mother which is breach of confidentiality.

Regards

What do you think about the last paragraph...too harsh??

zara13

I have drafted a reply to my mortgage broker....do you think this sounds reasonable? -

XXXX,

Regarding your bill, the amount is surprisingly high considering you have been paid for arranging the mortgage by the lender already.

I must state that as far as I am aware you did not provide an Initial Disclosure Document or some form of client agreement up front, where it stated that I would need to pay you if I cancelled the policy. If this had been provided and you had been more clear on the terms and conditions of your service I would not have readily cancelled the policy.

Nevertheless, I appreciate the work that you did completing the applications and I would be willing to pay what Scottish Provident were going to pay you for the life insurance which I believe is £263.

If possible could you please provide me bank details that I could pay the amount into as I do not have a cheque book.

I hope you find this amount reasonable, as I believe I have grounds to make a formal complaint for firstly not having an IDD provided and secondly for copying and sending the bill to my mother which is breach of confidentiality.

Regards

What do you think about the last paragraph...too harsh??

leccyblue

Too harsh? Not harsh enough! If you genuinely didn't received the IDD, and he genuinely didn't make you aware, then I wouldn't pay a penny. It is his responsibility to make you aware of the terms on which you are working with him. And given that he has breached the data protection act, he hasn't a leg to stand on.

amnblog

One thing that everyone has overlooked is that Zara has cancelled her life insurance.

Are you now without cover Zara? If so, this is the bigger issue.

zara13

why is it a big issue that I don't have cover...