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Thursday, January 11, 2007

Caveat Emptor

As if Britain's financial services industry did not have a bad enough reputation already, another nail has just been driven into it by the Financial Services Authority (FSA).

It seems that, according to the FSA, over 66% of mortgage advisors are failing to provide suitable advice in relation to mortgages, and some do not carry out the appropriate background checks required on prospective customers.

The FSA conducted a survey of 252 mortgage advice companies using; mystery shoppers, FSA visits and questionnaires.

Less than 33% of those surveyed had processes which ensured advice given was suitable.

The FSA said:

"We found significant failings in the advice-giving processes in a number of mortgage firms. Poor processes increase the risk of unsuitable advice being given.

It is essential that firms have robust processes in place, so that they treat their customers fairly and provide suitable advice. It is crucial that customer needs are assessed properly. Customers should consider what they can afford both now and in the future, taking into account any likely changes to their circumstances
."

Some companies have been "referred to enforcement", and face the risk of hefty fines.

These findings further damage the poor reputation of some mortgage advice firms. Less than 3 months ago one mortgage broker firm was fined £17K by the FSA for cold calling and mis-selling payment protection insurance.

Some mortgage brokers were also found to be misleading borrowers who had a poor credit history.

The old adage "caveat emptor", buyer beware, is as applicable today as it's always been.

You have been warned!

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