The FINANCIAL — On April 24 Full Portion Media reported that millions of consumers over the last 20 years have been financially deceived at the hands of many mortgage lenders, banks, insurers and mortgage/financial advisors. Andrew Callen, Managing Director Powell Callen Solicitors, specialist in property and finance law speaks with The FINANCIAL regarding the reasons causing the problem and possible solutions to the subject.
“It appears in most cases that the consumer will know nothing about it,” Callen tells. “What we are certain of is that where the client paid the broker a fee for advice and where the client also took out a lump sum ASU or Accident, Sickness & Unemployment policy, and where the broker did not disclose his commission, then it is almost certain that a hidden commission of between 50% and 70% was made in the deal of the lump sum concerned. The damages for this are around twice the lump sum taken out subject to detailed analysis.
“Avoiding secret commissions is difficult as it appears to have been fairly widespread in relation to lump sum ASU policies, unsecured loans in some cases and sub-prime lending although in fairness to the FSA since mortgage regulation commenced it appears to be reducing. The claim can be commenced we believe from the date the client became aware.”
Q. What are the basic reasons for why ordinary consumers happen to get deceived and what are the most efferent measures they could refer to in such cases?
A. What seems to have occurred with sub-prime borrowers is that the lenders or brokers implied to the client that unless they took out the lump sum ASU that they wouldn’t get the loan. Therefore borrowers in these difficult situations were being unduly influenced by personal pressure to take out these policies.
It should also be said that additional commissions were often paid secretly and the amount of remuneration was often based on the higher rate of interest a borrower was advised to take out by way of the loan itself. This also breaks the rules and is subject to much investigation.
Q. Could a court statement like this one: “If there has been no disclosure- the agent will have received a secret commission. This is a blatant breach of his fiduciary duty but additionally the payment or receipt of a secret commission is considered to be a form of bribe,” serve as consolation to ordinary clients?
A. What is clear is that the Courts will award high damages for such conduct where it is proven, as the payment of a secret commission to someone that you have paid to engage for best advice is considered akin to corruption and the damages can be substantial.
Q. One of the main areas where people are misled include recent loans that are under GBP 25,000 taken out in the last seven years or before the year 2000 loans of GBP 15,000 or less, also Unregulated loans that were improperly executed, the law of Agency between Financial advisor/broker in secret earnings/commissions, and Charges for single premium Insurance to protect mortgage payments with secret and excessive commissions therein. How many clients appealed to the court last year and how many of them won the case?
A. The area of the law of agency goes back some 300 years, however following a major Court of Appeal case in 2007 (Wilson v Hurstanger Ltd EWCA 27), the Court really set down how they felt about the whole Mortgage Advisor/Lender relationship on a retained Fee and the duty the advisor has toward the client.
We are aware of some 300 cases ourselves with the success rate being extremely high, there is no reason to believe that this will continue particularly with the advent of the Unfair relationships Act 2008 and the new Consumer Credit Act 2006.
Powell Callen Solicitors are specialists in property and finance law, and have a specialist team that solely deal with these types of enquiries in association with a network of specialist Solicitors around the country.
Q. What are the major advantages of Powell Callen Solicitors compared to the competitors and how competitive are your service prices?
A. Powell Callen solicitors are working with a limited number of solicitors who really are on top of their subject matter. What all law firms have agreed on about doing this work, is that we do not see each other as competition but as colleagues who for once are biting back on behalf of the clients, at the greed and insensitivity shown by corrupt advisors and lenders who sought to make secret commissions on those less fortunate. As a group of lawyers we have chosen to take on cases on a “Conditional Fee Agreement – No Win No Fee” our mission is to take these organizations on through the Courts where necessary and to reverse the balance of “Freedom to Contract” properly and to obtain compensation properly in accordance with the views and decisions of the Judiciary at Law for the clients concerned.
Q. What’s your view of a possible solution to the subject and how do you see the situation changing in 2008?
A. The lenders firstly have to admit their role and the extent of profits made as do the advisors concerned. Neither will do this easily without considerable pressure from the Courts, Public or Parliament. There then needs to be compensation properly dealt with and then clarity about honest disclosure and the agency relationship.
My own view is that this is probably bigger than the endowment policy misselling that we have seen and that once the public is fully aware, then it will become a massive headache for those that perpetrated it.
Written by Kate Tabatadze
