Reclaim of broker fee on mortgage

[Tools]

Re: Reclaim of broker fee on mortgage

The MCOB regulations and FSA involvement only came into effect in 2004 as far as I know. This may be what they are referring to. As I stated earlier in the thread though, I do not think you would have a claim other than the arrangement fees mentioned in Tuttsi's thread.

[Ruby]

Re: Reclaim of broker fee on mortgage

Surely prior to 2004 secured loan applications were accountable to some governing body? As Zizzyfit mentioned in his thread secret commissions should have been disclosed and since they had not been we have the right to know now since we have asked. The broker was probably not acting in our best interest in puting business IGroup's way if IGroup were offering them the best commission, plus a broker fee from us! There HAS to be something wrong there! Surely you either get paid a commission or a fee, not both.

Could somebody please explain what exactly is the meaning of fudicial duty?

[Tools]

Re: Reclaim of broker fee on mortgage

Could somebody please explain what exactly is the meaning of fudicial duty?

Fiduciary duty defined | UK law firm defines fiduciary duties in England

[jumper999]

Re: Reclaim of broker fee on mortgage

Hurstanger Ltd v Wilson and Another

The facts

Mr Wilson and his partner, Ms Burton, took out a loan with
Hurstanger Ltd, a non-status lender, via a mortgage broker. The
broker received a fee from Mr Wilson and commission from
Hurstanger. Mr Wilson knew that commission might be payable but
did not know that it was paid or the amount of the commission.
For reasons which relate to other aspects of the transaction, Mr
Wilson sued Hurstanger, rather than the broker, alleging, amongst
other things, that Hurstanger was an accessory to the adviser's
breach of fiduciary duty in failing to disclose the commission payable.
The law

This case was not covered by the FSA's Mortgage Conduct of
Business Rules as the loan was to be secured as a second charge
against the property, so it did not count as a "regulated mortgage
contract" and was not a specified investment for the purposes of the
Financial Services & Markets Act 2000.

Under the common law, an agent who receives a secret commission
without the informed consent of his principal is in breach of fiduciary
duty. A third party paying the commission and knowing of the agency
would be an accessory to the breach. Remedies (which are all
equitable) include rescission and compensation. Here it was alleged
that Hurstanger was an accessory to the adviser's breach.
In deciding the point, the Court of Appeal gave careful consideration
to what amounted to sufficient disclosure for the purposes of
informed consent and concluded that as the case related to a non status
loan made to potentially unsophisticated and vulnerable
investors, it was necessary for the lender to ensure that the
borrowers were aware of the amount of commission payable as well
as the fact that there would be a commission payment. Hurstanger
was therefore required to pay an amount equivalent to the
commission to Mr Wilson and Ms Burton; however, in the particular
circumstances it was not appropriate to rescind the contract.
Implications

Because this is a decision based on the common law, it will apply to
both regulated and unregulated sales involving third party
brokers/advisers. As there are clear regulatory requirements to
disclose commission, it is to be hoped that similar situations will not
arise where the sale is covered by COB, ICOB or MCOB as
commission will have been disclosed. However, not all sales of
financial products are regulated by the FSA: both second mortgages,
as in the Hurstanger case, and buy-to-let mortgages fall outside its
jurisdiction.

Although the Hurstanger case is a case against a lender, if a lender is
liable to pay compensation to a borrower because an adviser has not
disclosed a commission payment, it is likely that the lender will seek
to recover that compensation from the adviser. While Mr Wilson did
not obtain rescission of the mortgage contract, this was because he
was aware that a commission payment was possible; had he not
known that this was an option, the payment would have been treated
as a secret commission payment and rescission would have been a
real possibility, so claims against advisers will not necessarily be
limited to return of commission.

Firms and their insurers should therefore take particular care to
ensure that commission payments are disclosed. If in any doubt, the
amount of the payment should be disclosed as well as the fact of the
payment.