life as are customer claims, but


ng to address this issue? at should the mortgage industry be doing to address the mis-sold mortgage issue?


Firstly, don’t mis-sell them. The CAB service saw many cases of really poor mortgage sales practices before the crash: bad explanations and poor assessment of suitability and some truly irresponsible lending. Not just mortgages that were marginally affordable but low income households barely able to afford their first payment. Things have changed but this is far from yesterday’s problem. CAB money advisers are still seeing the consequences of those poor practices and even now we are seeing some cases of poor lending practices in respect of secured loans. The Financial Services Authority’s Prudential Risk Outlook


recently cautioned lenders to consider how future rate rises will affect affordability as income multiples return to pre-crisis peaks. This is today’s problem and will be tomorrow’s problem if lessons are not properly learned.


That is why we think the FSA is right to look at toughening


up responsible lending and suitability assessment rules in the Mortgage Market Review. This should raise the bar for mortgage intermediaries and rightly so. It is not surprising that borrowers may rely on what their


broker tells them, trust is part of the deal. Finding a loan no matter what is not good advice and intermediaries that do not understand this should be held to account if things go wrong. Secondly think about making amends. There is no doubt that the mortgage industry has worked hard at forbearance over the last three years. But with persistent unemployment, a stagnant market and a significant reduction in government support for mortgage interest, we sense that the forbearance consensus is starting to fray at the edges. We are starting to see more evidence of disputed


arrears management practices and industry talk is shifting towards how to help those with the most serious problems exit with the least pain. Firms should be thinking seriously and honestly about whether their past selling and lending practices contributed to the problems that borrowers are facing now and if so how appropriate redress might be part of the solution.


Peter Tutton, credit and debt social policy officer, Citizens Advice Bureau


It is an unfortunate truth that mortgages have been mis-sold as have pensions, endowments, Payment Protection Insurance and a raft of other financial products. The industry recognises this despite ill-advised attempts to blame one distribution channel or another. The FSA is also aware that both historically and today some bank staff remain pressured on sales and are paid on bonuses while also facing the threat of job losses. It also knows there remains a handful of brokers, despite the denials, seeking to maximise income regardless. Into this unsavoury mix is the often ignored but complicit involvement of a small minority of UK customers prepared to collude and commit criminal activity, signing untrue declarations both in and outside of branch. There is a tendency to look at this as yesterday’s problem many have argued consumer groups are dealing with issues of past mis-selling, now largely addressed. It is in the interest of consumers and the industry as a whole to support and encourage access to justice for those who through no fault of their own have been mis-sold products. Redress leads to accountability, transparency and the overall deterrent results in higher industry standards. There exists an independent system of remedy through the Financial Ombudsman Service - a non- commercial entity, free to consumers, with no upfront fees or top-slicing of compensation awarded. In contrast profit-driven claims management companies charge customers, pay for referrals or take a percentage of damage compensation. Their chequered history selling through false advertising and using unregulated introducers remains a concern of their own consumer protection body, the Ministry of Justice. Regulation in both industries has clearly benefitted the UK consumer but there is one universal step which would be successful in further addressing this issue. Lenders should be required to verify an applicant’s income by independent means and any fast tracking (if allowed) must be subject to regular, random checks on branch staff and brokers. Only this will protect lenders from fraud, bank staff and brokers from temptation and consumers from themselves.


Rob Killeen, director,


Capital Fortune sense. Do you want to be a part of the next Bigger Issue? Email nia@thepublishinggroup.co.uk Mortgage introducer APRIL 2011 29


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