Can I Claim ?

Prior to the global credit crisis in 2008 most loans or mortgages provided to borrowers with poor credit records (called sub-prime loans/mortgages) came via loan or mortgage brokers. Whilst the loan document would usually say if the broker was to be paid a fee, what they almost always fail to inform the borrower is that a substantial commission payment was also paid.

Whilst the exact level of commission would depend on your lender and the broker involved, the (secret) commission payments were substantial. Typically, a secured loan lender, such as Blemain Finance or GE Money would pay a commission equal to 10% of your loan amount. On top of this they would also be paid a commission based on the sale of PPI, usually 35-50% of the premium itself.

When dealing with loans before April 2008, the typical commission without PPI is £3000 and £6000 with PPI.

Re-mortgages were slightly different with commission payments between 3-5%, however, re-mortgages were for higher amounts and typical commission are between £5000 – £7000.

In 2007 the Court of Appeal heard the case known as Hurstanger v Wilson (a copy of the judgment can be found Here. The Court found that in respect of a secured loan transaction or mortgage, the broker is under a duty to ensure that he obtains the “informed consent” or permission of the borrower before being paid a commission.

There is a very straight forward explanation for this. Where a broker is being paid (without your knowledge) by a mortgage or loan lender, it puts him or her in a position where his duty to you (to give impartial advice) conflicts with his interests (to be paid a commission). In fact, The Office of Fair Trading regulated brokers and lenders before 2008 and they made it quite clear in their guidance notes that both brokers and lenders should provide full and frank disclosure of any commission paid.

Yes – There have been two further Court of Appeal decisions. The first in 2015 was the case of McWilliam v Norton Finance. Again, the Court found that the commission had not been adequately disclosed and ordered that the commission be repaid plus interest. The second judgment, Nelmes v NRAM came to a similar conclusion.

This is fine. We deal with each transaction separately and each could be worth as much as £50,000.

Yes, absolutely. In fact, for certain types of claim, a loan that is paid off pay result in a higher level of compensation.

The law relating to secret commission claims is highly complex. The Financial Ombudsman Service (FOS) routinely view these as being to do with a point of law rather than a complaint. Whilst there are certain rare circumstances where a CMC will be successful, usually it requires an experienced law firm liaising with your lender to achieve a positive outcome

Mortgage and loan lenders must comply with a range of legislation set out by parliament. These include:

The Unfair Terms in Consumer Contracts Regulation

The ‘Unfair Relationship’ provisions set out in the Consumer Credit Act 1974 (as amended) at section 140

Your loan or mortgage balance increases because the level of interest applied to your account increases as these charges are applied. This is a worrying time for borrowers as many that we speak to are worried that they will never be able to escape from the loan.

Where the application of these charges falls foul of these, you have a right to be refunded for your losses. This can include all arrears charges being refunded along with the interest you have paid on these charges. This can be substantial, and we have seen losses that exceed £30,000.

Your lender had a duty to ensure that your loan or mortgage was affordable and likely to be affordable throughout the duration of the loan. They should have had adequate provisions in place to check this.

Where you were experiencing financial difficulties at the time of the loan or mortgage, for example where you have CCJs, defaults or arrears outstanding on credit, those checks should have been more detailed to make sure you weren’t taking on a debt that you would not be able to afford.

We work alongside experience mortgage professionals who can assess whether your lender’s checks were sufficient. Where it can be evidenced that they were not, the law provides a range of remedies to assist you. This can mean that your loan or mortgage is changed to make it affordable, or, a full refund of the interest payments you have made.

These are high value claims and take longer than simpler claims such as PPI. However, the law firms we partner with on these claims are highly experienced at settling quickly with an average claim taking 9-12 months

Our partner law firms take a maximum of 25% of your damages. Their service is given on what is called a ‘no win no fee’ basis. You will only pay their fee out of damages you receive if successful.

You are not required to use a claims management company to pursue your claim. You have the right to go direct to your adviser, or to use the Financial Ombudsman Service (www.financial-ombudsman.org.uk) to seek redress independently and free of charge.