FSA Fines Three Mortgage Brokers

by Jason Gorringe, Tax-News.com, London

26 May 2008

The UK's Financial Services Authority (FSA) has fined three mortgage brokers for inadequate sales procedures which meant they could not demonstrate that they had recommended affordable mortgage contracts that met their clients’ needs, it announced on Thursday.

The FSA revealed that it had fined Mohammad Rana, registered as Countrywide Management Consultancy and trading as Property Compass (Countrywide) GBP14,700, Peter Scott, trading as the Mortgage House (Peter Scott) GBP11,900, and Chariot Mortgage Services Limited (Chariot) GBP10,500.

Some of the key findings included that:

• All three mortgage brokers failed to gather adequate customer information, including personal and financial information, to demonstrate the suitability of their advice;
• Countrywide also failed to ensure that appropriate arrangements were in place for the supervision and monitoring of its one adviser;
• Peter Scott did not have a sufficiently clear understanding of the regulatory requirements imposed by the FSA aimed at ensuring he gave affordable and suitable advice; and
• Chariot failed to communicate information to its clients in a way that was clear, fair and not misleading in that it held itself out as sourcing contracts from the whole of the market which in practice was not the case.

All three mortgage brokers are required to undertake reviews of past business to establish whether, behind the process failures, any customers received unsuitable advice, and to help put things right.

Jonathan Phelan, FSA Head of Retail Enforcement, commented that:

"It is deeply disappointing to find that mortgage brokers visited by the FSA are falling short of basic standards aimed at ensuring that they treat their customers fairly. We will continue to take disciplinary action against mortgage brokers who cannot demonstrate that the mortgage contracts they recommend are affordable."

He went on to add that: "Where we have concerns about the quality of the mortgage advice given, we will continue to require mortgage brokers to undertake reviews of past business, often at considerable cost to them, to identify and remedy any unsuitable advice."

All three mortgage brokers agreed to settle early and therefore qualified for a 30% discount.

Were it not for this discount their fines would have been GBP21,000, GBP17,000 and GBP15,000 respectively.

The mortgage brokers’ failings were uncovered during a series of visits by the FSA’s Small Firms and Contact Division, which focused in particular on self certification mortgages and affordability of mortgage advice, details of which were published in November 2007.

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