Equity Release - Misinformed

Jaffa_Bell

My mother took out an equity release loan to improve her home. A non profit middle organisation arranged the loan with an equity release loan company. The non profit organisation said that a government department would pay the interest on the loan as she received pension credit. They failed to say that the government department would only pay the interest if she met the strict criteria. It was only when the works had started and loan had been given that she was told she would be liable for £65 interest payment every single month. This was because the government department said she did not meet the strict criteria and they would only pay approx £15 of the £80 monthly interest. The £65 interest payment will continue until the house has been sold when she dies. This is very burdensome . The equity release was for £22k which no one in the family can afford to pay. She has been paying this interest for over 5 years. This is a significant amount of her limited income. Had she know at the very beginning that she would have to pay £65 lifelong she would not have committed to that. I do not think this is fair as she was not fully informed of the downfalls of taking out equity release. The middle organisation has now closed down. Is there anything she can do to challenge this?

Tixy

I suspect there may be little she can do.
Who was the 'middle organisation'? Were they regulated?

Have you/she got copies of the loan agreement/documents. Presumably these state that interest of £x is payable each month?

Did she have anything in writing from the middle organisation in relation to the interest being paid for her? Do you know the name of the goverment scheme that is paying a proportion of the interest?

jonesMUFCforever

She could sell up now and pay off the burden of the loan - then she could move in with you?

McKneff

Being told or not being told is completely irrelevant I'm afraid.


Doe she have anything in writing. She may have been indeed told and forgotten.


Its all down to what is on paper and what she has signed and ageed to.

NYM

2. Accepting business

2.1 Provider members may only accept applications for home reversion plans and lifetime mortgages through advisers who are authorised and regulated by the Financial Conduct Authority (FCA) and who are permitted to advise customers on a home reversion plan or regulated lifetime mortgage.

Giving advice on a home reversion plan or lifetime mortgage is a regulated activity under the Financial Services Act 2000 – and anyone carrying out such an activity must be appropriately authorised by the Regulator. It therefore follows that any provider of home reversion plans or lifetime mortgages may not accept mortgage business which is introduced to them by persons who are not appropriately authorised. It is up to individual firms to decide how best to comply with this requirement but The Council understands that in most cases, as a matter of best practice, firms check the authorisation of any intermediary which submits an application for a home reversion plan or lifetime mortgage in respect of every case submitted, at the time when the application is submitted.

2.2 Each application for business must be supported by the following declaration, which must be signed by the adviser:

”I confirm that I have passed an appropriate examination in Home Reversion Plans/Lifetime Mortgages as prescribed by the Financial Conduct Authority and that I have provided/supervised this equity release advice and recommendation.”

Provider members should satisfy themselves that all advisers are appropriately qualified: many will incorporate this requirement in their standard Service Level Agreement with advisers. Provider members will also, as a matter of good practice, carry out regular checks as part of their regular fraud prevention work. The Financial Conduct Authority publishes a list of approved qualifications in the Training and Competence section of the FCA Handbook.



http://www.equityreleasecouncil.com/ship-standards/rules-and-guidance/

Jaffa_Bell

My mother moving in with me is not an option. She is fiercely independent and would never agree to it.

Jaffa_Bell

Thank you for the responses. I don’t think it’s a good idea to name the organisation in a public forum. I guess a good place to start is to look at the agreement again in detail, as well as trying to determine what the legal function of the middle organisation was. The agreement may/may not have information about the interest payments. However, I can say with absolute certainty that the middle agent did not place any caveats, when stating that the interest payments would be paid. I know this as my sister was party to the conversation and has confirmed this. Also she would not have allowed my mother to agree to a loan which was burdensome. It was disingenuous of the middle agent, to provide misleading information.

Having read the Accepting Business terms paragraph, I believe the middle agent fell short of the FCAs standards, which I am pretty sure must place a duty on the advisor to fully inform clients before accepting any financial product. I will have do some research.

jonesMUFCforever

Jaffa_Bell wrote: »

Thank you for the responses. I don’t think it’s a good idea to name the organisation in a public forum. I guess a good place to start is to look at the agreement again in detail, as well as trying to determine what the legal function of the middle organisation was. The agreement may/may not have information about the interest payments. However, I can say with absolute certainty that the middle agent did not place any caveats, when stating that the interest payments would be paid. I know this as my sister was party to the conversation and has confirmed this. Also she would not have allowed my mother to agree to a loan which was burdensome. It was disingenuous of the middle agent, to provide misleading information.

Having read the Accepting Business terms paragraph, I believe the middle agent fell short of the FCAs standards, which I am pretty sure must place a duty on the advisor to fully inform clients before accepting any financial product. I will have do some research.

Read post #4 - then come back to us with comments.
If you don't have anything on paper - forget it you won't get anywhere.
If she is that independant that she won't live with you then perhaps it is not her that has the 'burden'?
Are you seeing your inheritance going down the swanee?

Jaffa_Bell

Yes she has the paperwork. I am going to go through it in detail.
Yes indeed, response 4 highlights that the middle agents are subject to a code of conduct. I doubt if they followed this.
I have no interest in an inheritance. My concern is simply for my mother who is shelling out a significant amount of money every month, who instead could be spending it on other things for herself.
Will follow up.

Caz3121

Jaffa_Bell wrote: »

The non profit organisation said that a government department would pay the interest on the loan as she received pension credit. They failed to say that the government department would only pay the interest if she met the strict criteria. It was only when the works had started and loan had been given that she was told she would be liable for £65 interest payment every single month. This was because the government department said she did not meet the strict criteria and they would only pay approx £15 of the £80 monthly interest.

How the non profit organisation could decide what the government would pay confuses me. And I expect that there be nothing in the contract that will cover this. Benefits are constantly reviewed and can be withdrawn (eg those on JSA can only get help with mortgage interest for 2 years maximum now whereas there was previously no limit). I expect they were suggesting SMI (Support for Mortgage interest)
SMI pays for the interest on the original loan amount but would consider the additional borrowing if it was for essential home improvements. It sounds like they are not classing the work done as essential/allowable so only cover the the original loan amount or the amount that they deem allowable
Did you confirm the loan interest situation with a government department before accepting the loan?

Jaffa_Bell

My mother had to apply for the equity release loan before she could make application for the interest to be paid. The loan was agreed and the works had started before she was advised that only a small portion of the interest would be paid by DWP. The initial information verbally provided, unequivocally was that the interest ‘would’ be paid if she received pension credit. No warnings or cautionary advice was given. It was interpreted by my mother and sister to mean that getting the interest paid was just matter of just making the application, as she was told by the agent that they met the criteria which qualified my mother to have the interest to be paid.
The letter from the agent in one of the paragraphs states ‘We note from our records that you are currently in receipt of Pension Credit. Due to the improvements, repairs or adaptations that you are considering you may be eligible for assistance from the DWP towards any monthly interest payments that are required…
The improvements made by my mother were for improvement, repair or adaptation, at no point was she advised that the criteria falling under these headings for the purposes of the interest being paid were very strict. (The agent already said verbally that my mother qualified, so my mother and sister did not even consider further advice was required.)
I feel that the agent was negligent in failing to give full information surrounding the uncertainty of the interest payment being paid DWP