Advance Mortgage Funding Ltd – part of the Pink network – has been told by the Financial Ombudsman Service (FOS) to pay a former client more than £60,000 after an adviser gave unsuitable mortgage advice in 2009.
The client, referred to as Mrs M, used the loan to buy an overseas property with Harlequin and had planned to use rent from the property to meet repayments.
However, the property was never built, Mrs M lost her money and had no way of servicing repayments.
Advance Mortgage said it wasn’t required to give advice on the suitability of the investment.
However, the FOS sided with the complainant.
The ombudsman said the mortgage had not been suitable for the client’s situation.
And that the adviser should have highlighted repayment risks and found out if Mrs M had other means of repaying the debt.
Toni Smith, business operations directors, First Complete and Pink said: “It is our policy not to comment on individual FOS cases.
“However, we respect the ruling and are currently working closely with representatives of the customer.”
Not to compensate for investment loss
In a written final ruling on the case, ombudsman Sue Wrigley said she didn’t uphold the complaint because the investment failed, or to compensate Mrs M for investment loss – but because she was not fully advised of the risks in repaying the mortgage.
Wrigley added: “Without the mortgage I don’t think Mrs M would have invested in the Harlequin property.
“She didn’t have any other savings or investments she could have used.
“So I think it’s more likely than not, that but for the unsuitable mortgage advice, Mrs M would not have invested in the overseas property and would not now be left with a mortgage she can’t afford to repay.”
The FOS said the only way to make the situation right is to put Mrs M in the position that had she never taken out the mortgage.
Advance has been told to repay the £58,500 loan, as well as interest payments on the loan and the mortgage arrangement fee.
Mrs M must also be paid £750 for trouble and upset caused by the situation.
It comes after the FOS last year told Intrinsic to pay compensation for interest-only mortgages, which were also used to fund Harlequin overseas property investments.