Secret commissions on mortgages

messeruk

Morning all

I read in the Sundays that the FSA is ruling on secret commissions being illegal, will this ruling have any baring on mortgages.
I know mine had a secret commission paid and I have been wondering what (if anything) i can do about it.

regards

Interested and hopefull :j

stephenni1971

Yes - you can claim one million pounds compensation for the secret commission on the mortgage you took.

Happy now?

betmunch

Are you sure yours had a secret commission?

It doesn't seem very secret if you know about it.

Are you sure your not thinking of the clearly stated and declared to you procuration fee?

messeruk

HE HE HE perfect:beer:

messeruk

Betmunch

It wasn't disclosed during the application process but is shown on the brokers sheet. I applied for that after a few years and reading various articles on the subject, they are reluctant to supply these things.

dunstonh

I know mine had a secret commission paid and I have been wondering what (if anything) i can do about it.

Mortgages have had commission disclosure since October 2004.

I read in the Sundays that the FSA is ruling on secret commissions being illegal, will this ruling have any baring on mortgages.

Not quite. An unrelated case (Plevin) has thrown up a can of worms. However, in that case, it was a broker using a lender and selling a third party product (PPI). The size of the commission (which is disgraceful) did have an impact on the decision by the judge. Mortgages pay tiny commissions and only if brokers were used. The FCA is considering what to do with the decision and if it will have any impact. It has not made anything illegal. Everything I have read indicates that it is the area of insurance that is being looked at and only if the person complains
https://www.fca.org.uk/news/statement-plevin-paragon-personal-finance

In principle, its unlikely to have an impact in most areas otherwise every single insurance purchase could be reclaimed. e.g. your car insurance, household insurance via comparison sites etc. It is more likely to have an impact on new guidelines for future business (which is what the FCA have indicated in their release) and have an impact in selected historic areas and the size of the commission is likely to be an issue in those cases. I cant see them making every insurance sale to be refunded as that would create instability in the market and create business failure. Something the FCA is required to avoid. Plus, as i said, the judge in the case did remark that a commission was expected but the size of that particular commission was not. It was the size that was the tipping point.

http://www.eversheds.com/global/en/what/articles/index.page?ArticleID=en/Financial_institutions/Plevin_v_Paragon

In addition to the above, it should be noted that the judge ruled it a breach under the consumer credit act 1974. So, as disclosure did not exist prior to October 2004 (so post 2004 is ok), it is worth noting, if my memory services me, that only secured borrowing below a certain amount was covered by the CCA. So, that blows most mortgages out of the water (£15k until 1998 and £25k after that)

It wasn't disclosed during the application process but is shown on the brokers sheet. I applied for that after a few years and reading various articles on the subject, they are reluctant to supply these things.

So, it was disclosed.

Senior_Paper_Monitor

'The brokers sheet' - presumably that is the keyFacts Illustration (KFI) which - like the mortgage offer itself - has a section 13. Using a Mortgage Intermediary clearly labelled as such.

Typically that section will say something along the lines of:

XYZ Mortgage Lender will pay 'name of network' and 'name of if adviser', a total of £520.00 in cash and benefits if you take out this mortgage.

Normally you will also have received an Initial Disclosure Document (IDD) with - where the broker is a typical fee + commission operator - in section 4 (labelled: What will you have to pay us for our services) will state something along the following lines:

"A fee of £XXX due on application. We will also be paid commission from the lender."


Regulations define the layout and size of fonts etc, so there is no question of hiding such information in 'the small print'.



I would be interested to know where this article was - as I know of nothing in the mortgage industry that is remotely secret in terms of what is paid to intermediaries.

Senior_Paper_Monitor

Thanks dunstonh ...

Have found the court ruling, which makes it clear that it has nothing to do with mortgages per se, but the already well publicised PPI issues and current regulations established to prevent any repeats:

From The High Court report:

Mrs Plevin took out a personal loan through LLP Processing (UK) Ltd (“LLP”). LLP proposed that she borrow £34,000 from Paragon Personal Finance Ltd (“Paragon”), repayable in instalments over ten years, and that she take out PPI for five years with Norwich Union, Paragon’s designated insurer.
The PPI premium of £5,780 was payable at the outset and added to the amount of the loan. 71.8% of the premium was taken in commission: LLP retained £1,870 and Paragon retained £2,280. The Financial Industry Standards Association guide which LLP gave to Mrs Plevin told her that“commission is paid by the lending company”, but she was not told the amount of the commission or the identity of the recipients

emmatthews

I presume you were happy with the mortgage your broker got for you? If you weren't then you had the option to say so and not proceed. If you were then why does it matter if they gained a commission?

As far as I'm concerned my broker earned his commission.

dunstonh

The FCA will shortly be publishing how firms should view plevin complaints. It is currently suggesting that where the commission is above 50%, then that would be considered unfair. However, as Plevin relates to PPI, the FCA is also considering applying the same timebar date as PPI complaints in general.

Most regular premium MPPI had commissions around the 20-35% mark.

So, in respect of this thread, Plevin is not likely to help the OP.

David_White

This is worth a read:

http://www.mortgagestrategy.co.uk/fca-rules-out-proc-fee-ban-in-upcoming-mortgage-reviews/