Mortgage broker ordered to compensate couple £63k

Thursday 28 March 2019

A mortgage broker found to have "misled" a couple into a pricy arrangement that caused them financial hardship has been ordered to pay the pair £63,000 in compensation.

The order comes after Future Finance unsuccessfully appealed a judgment by the Channel Islands Financial Ombudsman (CIFO) - an independent body set up to resolve customer complaints about financial services – in the Royal Court.

The complaint at the centre of the proceedings came from a couple who sought mortgage advice in October 2012 after making a successful offer on a £680,000 property.

Future Finance had told the couple they had been declined “by conventional ‘high-street’ lenders” because they had missed a mortgage payment in the previous year.  Instead their contact suggested a loan from a private lender, Berillic Loans, coupled with a loan from Future Loans Limited.

Shortly after the purchase, one party in the couple lost their job, and the pair found themselves unable to re-finance their mortgage with a conventional lender. They were eventually able to pay off the majority of their debts in 2015 and found a conventional lender to re-finance their mortgage.

Pictured: The Financial Ombudsman found Future Finance had misled the couple and ordered them to £63,340 in compensation. 

It was then that the couple decided to complain to Future Finance, saying that the arrangement they had organised was neither affordable or suitable for their needs at the time. But the mortgage broker did not uphold their complaint.

In response, the pair took their complaint to the CIFO in 2016, who, upon investigation, found in their favour in January last year.

The CIFO concluded that Future Finance had arranged an “unsuitable private mortgage” with “significant financial consequences”, further finding that the company had "misled" them by telling them they would not be able to secure a mortgage with a conventional lender.

In fact, the CIFO found "no evidence" at all that Future Finance had made "any reasonable effort" to contact mortgage providers to determine if loans to the couple would be possible.

In the end, Future Finance was ordered to pay £63,340 in compensation.

Pictured: Advocate Ian Jones challenged the Ombudsman's decision in Royal Court.

Future Finance attempted to have the decision overturned by applying for Judicial Review in February, before Royal Court Commissioner Julian Clyde-Smith and Jurats Rozanne Thomas and Sally Sparrow.

The application was based on five different grounds, the first of which being that the company’s activities did not fall under the remit of the Ombudsman.

Representing Future Finance, Advocate Ian Jones argued that the Ombudsman’s decision had been wrong as, contrary to what he said, there was evidence that the company had approached “retail-based mortgage providers."

The lawyer also said that if a conventional mortgage would have indeed been available to the couple in 2012, it was “unfair” to blame Future Finance for the fact the couple had failed to obtain one by themselves.

The Court agreed with the ombusdman’s lawyer, Advocate William Redgrave, that Future Finance hadn’t made “adequate inquiries to conventional lenders” and that the couple had wrongly been given the impression “that it was in their interests to opt for the more expensive private mortgage."

Pictured: The Court agreed with the Ombudsman's findings that Future Finance had not provided the best deal available.

Advocate Jones denied that Future Finance had “recommended” a private mortgage, arguing they had simply introduced the couple to a private lender, leaving them to decide whether they wanted to enter such an arrangement. 

The Court noted: “The Ombudsman found that they were misled by Future Finance Limited in that regard, and we agree with Advocate Redgrave that whether Future Finance Limited ‘recommended’ the mortgage or not is not the point. It gave the false impression that it was the best deal available.”

Future Finance’s lawyer also tried to argue against the rate the Ombudsman applied to certain aspects of the compensation, but the Court said they had “no grounds” to interfere with it.

In his judgment, the Commissioner noted that the role of Ombudsman involves reaching a determination “which, in his opinion, is fair and reasonable in all the circumstances of the case".

“In our view, the Ombudsman has done so and we have no basis to interfere on the grounds of illegality or irrationality,” the Court said, before dismissing the application for Judicial Review.

Pictured: The Royal Court dismissed the application for Judicial Review.

The CIFO said they will be “immediately taking steps” to ensure Future Finance pays the couple. They also indicated they will attempt recover legal costs in this case.

It was the first major success for the CIFO, proving the effectiveness of the body, Chair David Thomas explained.

“The Court found the Ombudsman’s decision to have been sound and in accordance with his statutory powers. This confirms the role of CIFO in providing a more accessible alternative to Court proceedings. CIFO resolves complaints effectively, with minimum formality, without any need for legal representation and in a manner that is fair and reasonable," he said.

“The outcome of this case demonstrates that CIFO is legally accountable and the Ombudsman has been found to be making decisions as intended by the governing legislation.”