The first comment was in response to the story: Broker wins case against charge of mis-selling interest-only mortgage 

Andy Wilson said: “As always, a robust file will help to protect against losing claims such as these, which are likely to become more and more common whilst we live in a ‘sue culture’.  

“It is not enough to give your clients sound advice, you need to be able to prove you gave them sound advice.” 

Acceptable strategy 

He added: “Converting an interest-only mortgage to a capital and interest loan in the future is an acceptable repayment strategy, as long as the effects and risks of such a strategy are carefully explained to the client upfront, and in writing. There would also need to be evidence on file of how this change would become affordable, preferably with some stress-testing calculations in place too in case interest rates rise in the meantime. 

“It would not be an acceptable strategy however, if there was no likelihood of meaningful changes to the borrowers income in the future to be able to afford to convert in this way.” 

Documenting evidence 

“We also know all too well that borrowers conveniently forget they needed to put in place a plan to repay the debt at the end of the term. They can also conveniently suffer total amnesia when asked to recount conversations that may or may not have taken place with their adviser, especially when someone is given a whiff of possible compensation, so documented evidence on file and saved forever is key,” he added.  

Wilson said: “As an example, my supervising network sensibly keeps electronic files for 80 years, and this is solely to be able to defend complaints.” 

Long live the BDM! 

Last week’s Star Letter comment, which questioned the need for business development managers (BDMs), also garnered responses. 

Simon Wilkinson kicked off the support for BDMs, saying: “A good experienced BDM is a lifeline for brokers and their value should not be in question.  

“The idea of different lender BDMs sharing a WhatsApp group is excellent and a useful way of getting cases placed and co-operation between BDMs is a useful resource for brokers.” 

Danielle Panteli weighed in, adding: “BDMs are so valuable. I’d say I speak to at least one of our BDMs once a week.  

“Some I’ve known through my almost 20 years doing the job and are more like friends. A BDM’s guidance, help, advice quite often decides if a case goes through or not. I’ve had more situations than I can count where a case has been declined and a BDM has managed to turn it around.  

“I, for one, love our BDMs and love seeing them in the office for a coffee and catching up. It’s also hugely valuable for new staff to learn the lenders USPs and during the last year we’ve relied heavily on our BDMs support with various changes in criteria especially for the self-employed. Long live the BDM.” 

Arron Bardoe said: “How can any broker demonstrate they are maintaining their awareness of lenders’ criteria and getting their clients the best deals without speaking to their BDMs? 

“While the quality varies in what support a BDM can provide, they make all the difference in my business.” 

Tiffany C saw things from both sides, saying: “Not all BDMs from each lender are as co-operative or truly adding any value compared to others.  

“I know some BDMs who go the extra mile for me and my cases which makes a huge difference than if I didn’t have that relationship in the first place. There are certainly some BDMs who are just there and not adding any extra value than if I called the broker helpdesk or looked it up on their website.” 

This week’s top comment came from Andy Wilson, in response to the article: Brokers still not using suitability letters ‘scares me’ – Jannels

He said: “All advisers need to have a robust file that could represent a solid ‘case for the defence’ when the claims chasers come a calling, and with PPI (payment protection insurance) claims having ended, you can expect mortgages to be the next targets.

“You may think the discussions you had with clients will be enough to protect you if you document some of the outcomes, but clients who later make complaints tend to have selective memories as to what they were told.

“Your only defence against accusations of poor advice is to have a clear suitability letter and file notes that summarise accurately what was said, which are all dated and timed.”

He added: “Take a look at any one of your client files and imagine a complaint has come in that says this:

• The adviser did not consider my future circumstances in the advice process
• The adviser ignored my overall financial position
• The adviser ignored the fact I couldn’t afford this mortgage
• The adviser did not ascertain my attitude to risk on interest rates, inflation, house prices and the possibility of early repayment
• The adviser knew I planned to retire before the mortgage term ended meaning I could not afford it after retirement

“Does your file have documented evidence to confirm all of these points were covered? If not, it only takes one of the challenges to succeed for you to be coughing up compensation.

“Don’t forget, in the world of complaints, the customer is always right, and things that might have been said weren’t said unless you also have it written down.”

Concluding, Wilson said: “I speak as a previous director of a firm that had over 400 complaints, mostly endowment-related, and the ones we lost were the ones with no clear documentation on file.

“In my own business, established for over eight years, we have not had a single complaint, but if a claims chaser complaint was to come in, I am confident the files would pass muster.”

The total is a sharp fall from the £22m brokers coughed-up in 2018-19 and it includes £1m from lenders as their contribution towards broker fees is introduced for the first time.

According to the regulator’s plan and budget for 2019/20, it is expecting home finance related claims to return to recent normal levels after a spike during an “exceptional” last year for the industry.

Compensation limits will also change within the home finance intermediation class in the coming financial year, rising to £85,000 from £50,000.

These new limits will only apply to claims relating to failures declared in default after 1 April 2019, rather than claims relating to failures declared in default prior to that date.

The FSCS said it will be launching a communications campaign to explain these changes to consumers in the coming months.

£70m provider contribution

Overall, the regulator has increased its levies to £516m in the coming year, up from £468m in the nine-month year of 2018/19.

The change from a nine- to a twelve-month period is the main reason for the increase in the levy from the previous year.

If the 2018/19 levy had been for a twelve-month year, then it would have been £574m – £58m higher than the proposed 2019/20 levy, the FSCS noted.

In total providers across the financial industry will be contributing £70m to the direct costs of FSCS levies for advisers and other intermediaries.

This was introduced after a long campaign by adviser representatives and trade bodies which they hope will just be a “starting point”.

Swansea-based McCaskill & Morse launched in March 2012, offering a no-win-no-fee service for mis-sold payment protection insurance (PPI) and bank charges reclaims.

However, clients complained to the Ministry of Justice (MoJ) that McCaskill had failed to return upfront fees and paid refunds late following unsuccessful claims.

The MoJ warned McCaskill that it was engaging in unfair trading practices before the company was put into administration in November 2015 owing £93,700.

Subsequent Insolvency Service investigations confirmed many of the allegations and data revealed clients received their refunds between 180 and 380 days after the start of the claims process, more than double McCaskill’s 90-day contract terms.

McCaskill also failed to inform the Ministry of Justice about changes to its business model, including the charging of up-front fees which they had previously declared it did not intend to charge.

As a result, the Insolvency Service concluded that McCaskill had been engaging in unfair trading practices in breach of the Conduct of Authorised Persons Rules 2006 and 2013.

Clawback company failed to return money

The five directors are now banned from acting as a director of a company, cannot take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership, as well as being unable to be a receiver of a company’s property.

McCaskill traded from Suite 1, 4th Floor, Alexandra House, Alexandra Road, Swansea, SA1 5ED.

Timothy Chapple has been disqualified for eight years, Richard Adams for six years, Catherine Wood for five years, Gary Richards for five years and James Bell for four years.

Insolvency Service investigations group leader Robert Clarke noted: “It’s ironic that McCaskill, a company established to support consumers claw back money owed to them, consistently failed to return what was rightfully owed to its clients.

“The length of the bans should serve as a warning to other directors who may feel tempted to breach legislation intended to protect the public, that the Insolvency Service will seek lengthy periods of disqualification.

“I would also like to thank my colleagues at the Ministry of Justice and the Legal Ombudsman for their hard work and co-operation in achieving this outcome,” he added.

The provider says it paid out £606m in the 12 months to December, an increase of £64m on the previous year, including £316.5m in life insurance claims, £181m in critical illness claims and £107m in terminal illness claims.

The figures show 98.6% of claims for life were paid out, 95.9% for terminal illness, and 92.56% for critical illness.

Mark Holweger, managing director, Legal & General Insurance (Partnerships), said: “Our figures show that protection continues to play a vital role in supporting thousands of people in their time of need every year, giving them added peace of mind about their finances when they need it most. Yet still, the UK continues to suffer from a protection gap which leaves many people’s lifestyles at risk should they sadly be diagnosed with a critical illness or unable to work due to long term illness. We hope that advisers are able to make positive use of these statistics to further address this gap, and show consumers how important protection can be during an extremely challenging time in their lives.”

Regulation of second charge lending was brought under the Financial Conduct Authority’s mortgage rules last March, as part of the regulator’s implementation of the Mortgage Credit Directive.

Under MCD rules, a firm cannot describe themselves as independent unless they give advice and recommend products from the whole of the market, including second charges.

Brokers can choose not to offer seconds within their scope of business and therefore do not need to advise on them, but they must still ensure that customers are made aware that a second charge may be more appropriate than a remortgage.

Alistair Ewing, managing director of The Lending Channel, said: “There will be potential claims if the adviser has independent or whole of market status but is not offering or discussing a second charge with the client and documenting this.”

Steve Walker, managing director of Promise Solutions, said some mortgage brokers rely on their misconceptions of the market to justify avoiding engagement with the second’s industry.

He said: “Seconds regularly result in far better outcomes for borrowers and those brokers who explore this will enjoy the rewards now and potentially avoid criticism of their sales process in the future.”

Although Walker said it is not necessarily an area claims companies would “jump on”, he said there is the potential for a customer to complain to the Financial Ombudsman Service that they were sold a remortgage when a second charge would have been more suitable.

He said: “If a broker claims to be whole of market and can’t defend such a complaint via FOS, a dangerous precedent might be set which could ignite activity by the commercial claims companies.”

“Surely it is better to do the right thing and evidence it, rather than ignore it and hope for the best.”

Tim Wheeldon, chief operating officer at Fluent for Advisers, said: “There are clear cases where due to a client’s circumstances, deteriorating credit profile, existing cheap mortgage, high early redemption fees etc, that the regulator could rightly claim that if a remortgage was recommended, it was detrimental to the client. Brokers should be careful.”

We all know how common flood and escape of water claims are. However, I often hear people say “I’ve never known anyone who’s suffered a fire at their home”, but at Berkeley Alexander we’ve recently had three cases of a total loss from fire on a household policy, with three different insurers. It does happen so don’t ever think it won’t happen to your customers. This stark reality brings the subject of under-insurance sharply into focus.

Whatever the reasons and whether in personal or commercial lines, clients continue to take the risk of being under-insured. Frustratingly this is even against a backdrop of a soft market – particularly in household where premiums have fallen.

Brokers have a responsibility to make clients aware of the perils of under-insurance and to ensure their assets are suitably covered. The key word here being ‘suitable’. Having the right level of cover in place doesn’t have to mean a five-star rated product. Despite the fact that the cover provided under three or four-star products is often just what the client needs, they’re sometimes overlooked in the rush to deliver five-star cover to every single customer, just for the sake of it. Don’t get me wrong – these products have their place of course, and we offer a number of defaqto five-star rated products ourselves among our range of products, but I do wonder if sometimes too much emphasis is put on these ratings.

It is also important to remember that a five-star product may include certain bells and whistles that customers may neither want nor need and since you get little or nothing for free these days, they could end up paying more for their insurance than is necessary.

Surely, our responsibility is to find every client ‘the right cover at the right price’ to make sure they are suitably protected and never under or indeed over-insured.

The question the Supreme Court had to address was whether the claim would have been equally recoverable if the statement by the insured had been true or false. In essence, its ruling recognises the difference between someone using fraud in an attempt to gain something to which they’re not entitled and someone who lies or is reckless in their statement but stands to gain nothing beyond what they are legally due.

This decision could have serious repercussions on honest customers and to say that the Association of British Insurers was disappointed is an understatement. It viewed the ruling as flying in the face of the efforts that the industry has made and continues to make to crack down on insurance cheats and fraudsters.

The ABI has warned that the decision could push up the cost of insurance and prolong payouts for honest customers as allowing lies could distort the claims process by the time and cost involved in unearthing the fraud and attempting to determine its true implications.

Insurers are in the business of paying genuine claims and do apply a degree of forbearance to their customers. For example, if a customer genuinely damages an item but then produces a fake receipt because they have lost the original, while this is actually fraudulent the fact is the customer has a genuine loss and the fraud does not affect that and most insurers would settle the claim.

However, be in no doubt, inflating the value of an otherwise genuine claim remains fraud at the end of the day. Lies are lies and insurers have a duty of care to their honest customers to investigate suspected fraudulent claims.

While some of your clients may be unaware of the Supreme Court’s ruling, you do have a duty of care to ensure they understand the importance of honesty not just when it comes to making a claim, but when it comes to purchasing an insurance policy in the first place. While a collateral lie may not impact a claim, fundamental dishonesty and downright fraud could result in a policy being invalidated, a claim being rejected and the client could even find themselves in the dire position of not being able to source insurance in the future.

Insurers are deadly serious in weeding out fraud. It costs all of us dear so be clear to your clients that lying – even a little white one – will not pay.

In April, FreePPICheck published a tweet and Facebook post advertising refunds made by Lloyds and Halifax to two customers who submitted payment protection insurance (PPI) claims through the company.

In response to LBG’s complaint that refund figures used in the ad were misleading and unsubstantiated, FreePPICheck provided the identity of the customers and the details of the claims, explaining that the amounts referred to were those offered by the respective banks.

While the Advertising Standards Agency (ASA) confirmed that the customers had been successful in their claims through the company, it found that a 25% fee levied by the company refund plus VAT was not included in the advertised refund figure.

The ASA said this “material information” would play a key role in a consumer’s decision to make a claim with the firm, warning that the ads must not appear again in their current form.

“We considered the omission of the fee and the impact it had on the amount that was to be refunded created the impression that consumers would receive and benefit from the total amount quoted in the ads. Because that was not the case, we concluded they were misleading,” the ASA said.

Lloyds also lodged a complaint against myclaimsexpert.co.uk, for text featured on its website alleging: “…Loan, Mortgage or Credit Card PPI Insurance Our average claim is well over £2,000…”

According to BCB Solutions, which owns myclaimsexpert.co.uk, its own data showed that they had made 1637 settlements in the past year, with the total settlement amounting to £3,328,923.50, which gave an average settlement of £2,033.55.

But the ASA said myclaimsexpert.co.uk had failed to clarify whether the data showed all the claims handled in 2014, including those that had not resulted in a settlement, or provide supporting evidence demonstrating that this was the case.

The regulator considered this “significant information” as any unsuccessful claims that were not included would influence the average settlement quoted in the ad.

It added: “Furthermore, myclaimsexpert.co.uk did not provide evidence showing that their regulator also enquired about the same claim during their last audit and had accepted that the claim was accurate.

“We therefore considered that myclaimsexpert.co.uk had not provided sufficient evidence to support the claim “Our average claim is well over £2,000”. We concluded that it had not been substantiated and was misleading.”

The ASA has prevented the ad from appearing again in its current form, warning the firm that any average claims advertised in the future must be based on the correct number of clients seeking compensation, including those claims that have been unsuccessful.

A complaint lodged by Lloyds Banking Group, challenged whether the statement on Claimback.com’s website was misleading and could be substantiated with evidence.

On its website the firm describes itself as an independent claims management company which “specialises in helping to claim money for clients who have been mis-sold a mortgage or mis-sold PPI.”

The advertising regulator raised concerns when Claimback.com’s failed to respond to its enquiries and said that its claim could encourage consumers to pursue an interest in the company. It concluded that the ad has breached rules of misleading advertising and substantiation.

The ASA said: “The ad must not appear again in its current form. We told Claimback.com not to state that they had claimed a certain amount for their clients if they could not provide evidence to substantiate it.”

Despite receiving a ban on the ad from the ASA, the statement still appears on the company’s website.