Many news stories this week have focused on brokers being fined by the FSA for giving unsuitable advice to customers. Broker Robin Knox was fined £17,500 for giving poor advice to over 500 of his customers. Much of the problem was that Knox did not ensure that his firm disclosed fees to the customers. FSA head of retail enforcement Jonathan Phelan says: “We are continuing to find instances where mortgage brokers are unwilling or unable to maintain the standards we require and where we come across this we will use our regulatory powers to ban these individuals and where appropriate impose a financial penalty on them as well.”
Whilst it is clear that brokers must be open and honest about fees and offer the best deal possible to customers, the term “unsuitable” advice can be fairly ambiguous. In the boom times, many brokers sold mortgages to clients that were above a client’s means-but the client was willing to take the risk and manage the burden of the large loan.

For example many mortgages of high value were sold to people close to retirement in the boom times, on the basis that the client was aware that the sum would have be paid monthly into their old age or offset against the value of property when moving. In these cases it is more difficult to determine the unsuitability of the advice, as although large mortgages should not be recommended by brokers to those who don’t have the means to repay, if the party in question want the mortgage that is being offered and are aware of the consequences it is unclear whose responsibility this becomes. In some ways in can be argued in these kinds of cases that consumers must take responsibility for their own actions. In terms of TCF it seems to be in line as the customers are fully aware of what they are taking on and have been offered all alternatives, but in terms of suitability of advice the answer is more indefinite.

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Lucy Trueick