WIREDGOV

The Financial Services Authority (FSA) has fined three mortgage brokers for inadequate sales procedures which meant they could not demonstrate that they had recommended affordable mortgage contracts that met their clients’ needs.

The FSA has fined Mohammad Rana, registered as Countrywide Management Consultancy and trading as Property Compass (Countrywide) £14,700, Peter Scott trading as the Mortgage House (Peter Scott) £11,900, and Chariot Mortgage Services Limited (Chariot) £10,500.

Some of the key findings are summarised below:

• All three mortgage brokers failed to gather adequate customer information, including personal and financial information, to demonstrate the suitability of their advice;
• Countrywide also failed to ensure that appropriate arrangements were in place for the supervision and monitoring of its one adviser;
• Peter Scott did not have a sufficiently clear understanding of the regulatory requirements imposed by the FSA aimed at ensuring he gave affordable and suitable advice; and
• Chariot failed to communicate information to its clients in a way that was clear, fair and not misleading in that it held itself out as sourcing contracts from the whole of the market which in practice was not the case.

All three mortgage brokers are required to undertake reviews of past business to establish whether, behind the process failures, any customers received unsuitable advice, and to help put things right.

Jonathan Phelan, FSA Head of Retail Enforcement, said:

"It is deeply disappointing to find that mortgage brokers visited by the FSA are falling short of basic standards aimed at ensuring that they treat their customers fairly. We will continue to take disciplinary action against mortgage brokers who cannot demonstrate that the mortgage contracts they recommend are affordable.

"Where we have concerns about the quality of the mortgage advice given, we will continue to require mortgage brokers to undertake reviews of past business, often at considerable cost to them, to identify and remedy any unsuitable advice."

All three mortgage brokers agreed to settle early and therefore qualified for a 30% discount. Were it not for this discount their fines would have been £21,000, £17,000 and £15,000 respectively.

These mortgage brokers’ failings were found during a series of visits by the FSA’s Small Firms and Contact Division which focused in particular on self certification mortgages and affordability of mortgage advice, details of which were published in November 2007.

Notes for editors

1. The Final Notices for Chariot Mortgage Services Limited, The Mortgage House, and Countrywide Management Consultancy are available on the FSA's website.
2. Chariot is a limited company operating as a mortgage broker in Sale, Cheshire.
3. Peter Scott is a sole trader operating as a mortgage broker in Horsham and Portslade, West Sussex.
4. Countrywide Management Consultancy is a sole trader mortgage broker based in Oxford.
5. FSA Press Notice 007/120 describes the findings of the FSA’s thematic work which examined the assessment of affordability, self-certification (self-cert) mortgages, training and competence standards, and the effectiveness of senior management controls.
6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
7. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.