A Part 20 claim allows lenders to bring in a mortgage broker as a Part 20 defendant which pushes the responsibility of the sale of unregulated products to brokers.
Brokers are protected from such claims when selling regulated products such as mortgages as they are sold under a pre-defined path regarding research and suitability for a client. However unregulated products that are packaged into a product such as PPI or a secured loan are not subject to the processes of documentation enforced by the Financial Services Authority. This can leave mortgage brokers in the firing line of the claims culture.
Clients who face repossession on mortgages sold with PPI could make the defence that the mortgage taken out could have been mis-sold by virtue of the fact that the PPI was mis-sold.
Mortgage brokers are able to protect themselves if they have retained the documentation and an audit trail showing that the products were not mis-sold and were appropriate for the client at the time.
Steve Walker, managing director of Promise Solutions, said: “When it comes to a mortgage sale, brokers follow a very clear and defined FSA-prescribed path regarding research and suitability to the products they will offer. But when they start looking at a secured loan, there seems to be a view by many, although not all, that they shouldn’t worry about it as it’s not regulated by the FSA.
“I take the view that the holistic advice that brokers offer to clients should have the same process wrapped around it. Therefore if you are selling a mortgage but you offer a secured loan, you should also have to research the secured loan and mention it in a suitability letter to confirm to your clients why you chose that product and to have the audit trail should you ever be challenged in the future.”
