Rise in number of dodgy mortgage brokers
Over the past three years there has been a marked rise in the number of mortgage brokers under the watchful eye of the UK’s financial regulator, the Financial Services Authority, with a rising number of brokers being fined for malpractice and mis-selling. The FSA has been cracking down particularly hard over the past year as a result of the chaos and turbulence that has gripped the financial, mortgage, and housing sectors since the onset of the global credit crunch.
This year alone the financial regulator has imposed nearly £21 million in fines, and around £1.5 million of this has been against a number of mortgage brokers who were found to be guilty of misconduct. This included things such as putting false information on applications, submitting false applications, offering unsuitable advice, and failing to exercise competence. The FSA has only been overseeing the sale of mortgage since 2004.
One industry official said: ‘The FSA is having a purge on mortgage intermediaries right now it is focusing very intensely on stamping down on poor standards within the mortgage industry. A lot of the sins are hidden in a rising market but when things start to go wrong then consumers are far more likely to complain. The mortgage intermediary market is very splintered and whilst I generally think that standards are not bad, at the bottom end of the market, there quite a lot of rogues, especially within the subprime sector.’
One mortgage broker firm, Orchid Financial, was recently fined £34,500 by the FSA for for ‘failing to ensure it provided suitable advice which exposed over 900 customers to the risk of being sold an unsuitable mortgage’.
An FSA official said: ‘Orchid’s failings meant it could not demonstrate that its mortgage advice and sales were suitable. This fine sends out a clear message to brokers that their advice must be of good quality – otherwise there is a likelihood that they will not be treating customers fairly.’
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