Clients go after the go-between
Sunday 06 August 1995
Self-employed financial services adviser Graham Price (not his real name) approached Meridian Mortgages of Leicestershire after he found a house that he wanted to buy. But he ended up without a mortgage, lost his chance of buying the home, and is still waiting for a refund of a pounds 510 fee he paid to obtain a mortgage.
Mr Price needed a pounds 39,000 mortgage, but his low declared earnings meant he was rejected by lenders and two other mortgage brokers. Meridian, he says, told him it would be able to get him a mortgage, but first he had to pay a pounds 350 fee, plus a further pounds 160 for a property valuation.
"They went to two lenders, who both said no. I got no correspondence to give me any reason. Then they approached another broker who also lends. They turned me down for a loan, and gave me details of another lender, asking me for pounds 100 up-front, and a further pounds 400 on completion. But they only offered a pounds 36,750 mortgage, which was not sufficient.
"I asked Meridian for my money back, and then they said they would find another mortgage," said Mr Price. Instead, the broker asked him to apply for an unsecured loan, which he turned down.
Mr Price cannot obtain redress through the Personal Investment Authority, as mortgage brokers are not covered by the Financial Services Act. They are licensed by the Office of Fair Trading, which Mr Price has asked to revoke Meridian's licence. Leicestershire County Council has also complained to the OFT.
"We have had the occasional problem with mortgage brokers before, but nothing on this scale," said Richard Peck, assistant director of trading standards for Leicestershire council. "It has been going on for at least 12 months."
Leicestershire's principal trading standards officer, John Fox, who has been in charge of the Meridian case, added: "One of our frustrations is that no criminal offence has been committed, so we can't prosecute, we can't take direct action. The only action we can take is to question their licence, which is slower. If we had been able to prosecute the case, would have been in court last autumn."
The Consumers' Association says the law does not properly control mortgage brokers. "It definitely needs regulation," said researcher Sophie Gumpel, "probably by extension of the Financial Services Act, by implication using the Personal Investment Authority. People can't be sure of getting the right advice under the current system. Because there's no regulation there's no system of redress. Clients should beware of up-front fees. It seems very easy to get a credit licence, and it's not being very well policed by the OFT."
Steve Barker, a manager at Meridian Mortgages, said: "Dealing in the market we are in, you are going to get people making complaints. We have contracts which state that in some instances we do not pay the fees back."
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