First published by Financial Reporter
With the deadline date for PPI claims having passed on the 29th August this year, there appears to have been a ramping up of speculation recently around whether claims management firms might now focus their energies more on the mortgage market, given that they can no longer generate the levels of claims they will have become accustomed to.
In the last week, I’ve read of reports that HMO landlords for instance might be a target due to the HMO licence changes that were brought in last year. Apparently, ‘ambulance chasers’ have been targeting students who currently live in HMO properties which do not have a licence. Claims have already been made and landlords without a licence not only can’t charge rent to their existing tenants, but they have had to refund rent retrospectively to the point at which the licence was required.
Given there is widespread confusion around what types of properties now require an HMO licence, this should certainly be something that advisers are advising their landlord clients to review, and make sure that they are not inadvertently exposed.
What does seem somewhat extraordinary is that, according to some very well-positioned sources, the mortgage industry could be creating the potential for greater levels of mortgage-related complaints. Earlier this month, AMI – in its latest economic bulletin – suggested that a rise in execution-only business could mean borrowers are more likely to get ‘unfair mortgage deals’ which may result in a rise in complaints and requests for compensation.
The trade body expresses concern that any new environment resulting from the FCA’s Mortgages Market Study work could mean an increase in execution-only mortgage business, and a push by lenders active here to develop products that look attractive at the outset but might have a sting in the tail in terms of penalty clauses, for instance. These clauses might only be understood by the borrower at the end of their term when they become exposed to them.
AMI rightly argues that the PRA does not necessarily rule out such products and, if borrowers in the future come to believe they have been mis-informed about such mortgages, or the FCA/FOS deem that lenders have gone too far down the execution-only route in order to generate low-cost, non-advised business, then it might uphold complaints of this nature.
Of course, complaints are what we might deem a ‘necessary evil’ in any sector – indeed, I’ve often felt that firms can learn a great deal and change for the better as a result of a complaint or two – but it seems somehow self-defeating for the industry to pursue a method of securing business which could ultimately attract greater levels of complaints.
In a way, the whole mortgage industry could be tarnished by such a chain of events, even if it might result in us being able to develop an even stronger message around the importance of independent, impartial mortgage advice.
What should always be at the back of our minds here are the areas that claims management companies may be targeting. Mortgages is potentially one of them. Run a Google search on ‘mortgage claims’ and you’ll be presented with ads suggesting that anyone who has had a mortgage in the last 25 years could be due compensation, so there’s no denying that these CMCs see the mortgage market as having ‘potential’.
It makes the compliance checks and processes you have in place even more necessary and, of course, having technology/a system which can tell your advice story for every single client from the point of initial contact through the entire case is vital. Firms who might not be so confident in the business oversight they have, whether through their Principal or via their third-party compliance provider, might well wish to review the other options that are available to them. This is no time to feel less than 100% confident about those who are supposed to look after the best interests of the business, and make sure you are working to the highest of compliance standards.
Certainly, as a leading national mortgage network, it’s possible to review regularly and if necessary, intervene, very early to ensure firms are not exposing themselves to an unnecessary level of risk. Having that level of interest and oversight should be particularly comforting and provide a greater level of confidence that you will not end up on the radar of CMCs who are clearly looking for their next pay cheque – despite needing to be vexatious or frivolous as they largely are.
Rob Clifford, Chief Executive of Stonebridge