Failure to refund fees to clients when a deal falls through remains the most frequent complaint against mortgage brokers, according to the Mortgage Code Compliance Board (MCCB).
Figures released in February found that 39% of all complaints reported to the board were due to refunds, and although the actual number of complaints has fallen slightly since then, the MCCB said it is still the main cause of complaint.
At present, brokers are only allowed to keep £5 for their services if the deal falls through or is not completed within six months. But many brokers are dissatisfied with the law as it stands and want the MCCB to consider ways around this if the failure to complete arises through no fault of their own.
Brad Baker, head of communications at the MCCB, said: ‘At the moment, if they were found to be in breach of the Mortgage Code and a number of claims were substantiated, then the ultimate sanction of the MCCB would be to remove them from the mortgage register, but the OFT could remove their consumer credit license which would stop them from trading altogether.’
The MCCB has ruled that brokers can only keep a larger fee if it has already been paid to a third party for items such as valuation fees. But the regulator is reporting a growing number of cases in which brokers are splitting their fee up into a number of different areas, such as valuation fees and packaging fees, to protect themselves.
Bernard Clarke, communications manager at the Council of Mortgage Lenders, said: ‘It is clear what brokers are entitled to do and not to do. They are not able to get round the issue of fees by renaming them if it does not lead to completion within six months. The only thing they may have a genuine claim for is for disbursements to third parties for things like valuations.’
Nevertheless, many brokers are unhappy at the size of the fee if the deal fails. Ray Boulger, senior technical manager at Charcol, said: ‘There is definitely a case for change. It has been £5 for at least 20 or 30 years so it should at the very least be upgraded in line with inflation. In some cases, clients lose the property because they decide not to go ahead, or because of legal problems with the deal. But there are cases where the broker does everything right and the client just uses the system to avoid paying a full fee.’