Cheshire mortgage broking firm Mortgage Matters Partnership is paying the price for failing to ensure its clients received suitable advice. After the intervention of the Financial Conduct Authority (FCA), the firm will now be required to carry out a customer contact and redress programme.

The FCA is concerned about the firm’s sale of debt consolidation mortgages. The extent of the detriment suffered by clients could be significant, as the programme will cover sales made over a period of seven-and-a-half years, from January 2007 to July 2014.

Specifically, the regulator’s intervention concerns the sale of debt consolidation mortgages by Mortgage Matters. The firm will now need to write to every client who took out such a mortgage during the period between 2007 and 2014, and inform them that they may not have received suitable advice.

In particular, the letters will highlight that Mortgage Matters may have neglected to consider:

1. Whether the client should instead have entered into a debt management or insolvency arrangement to try and solve their debt problems
2. Whether it was appropriate to convert previously unsecured debt into secured debt, thus increasing the potential risks to the client of failing to maintain repayments
3. The costs involved with extending the term over which the debt was to be repaid. Although debt consolidation may reduce the amount being repaid each month, a mortgage typically has a much longer repayment term than other forms of borrowing. Clients may have as a result ended up paying a great deal in additional repayments once all monthly payments over 25 years or so are added up

The letters will invite recipients to make a complaint to the firm about the advice they received. Any complaints it receives must be handled by an independent third party. Where the third party identifies that the advice may have been unsuitable it will instruct Mortgage Matters to pay appropriate redress to the relevant client. Mortgage Matters must comply promptly with all such instructions to pay redress, and where these offers are rejected, it must inform the client of their right to refer the matter to the Financial Ombudsman Service.

The appointed third party must report to the FCA on the progress of the redress scheme at least every two months.

Mortgage Matters is no longer trading, but the firm remains in existence, and its activities are still regulated by the FCA.

This case illustrates the importance of giving suitable advice to clients, and the importance of having a rigorous compliance monitoring programme in place so that unsuitable advice is identified at point-of-sale, ideally before any products are taken out.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.