If interest only mortgage claims succeed, we might as well set up a zero fail regulatory regime

A little press release from a lawyer suggests that the FCA paper on interest mortgages could see class actions against lenders and advisers. This is based on the finding that 13 per cent of borrowers say they didn’t understand the terms of the mortgage.

Here is the pertinent quote.

Andy Millmore, a partner at Harbottle & Lewis (www.harbottle.com)  says: “What is significant is that this leads to the question of why they did not understand, and whether they were mis-sold, with the strong possibility that many will believe that they were”.

“The problem in the past has been the cost of taking lenders and intermediaries to court. But since last month, solicitors can undertake work on a true contingency basis, sharing in recoveries, which makes the prospect of legal action more likely in my view if groups of borrowers were affected in the same circumstances.”

“This report suggests that interest-only loans could represent a similar issue to payment protection mis-selling, with the potential to secure very significant pay-outs.”

“In turn that could lead to criticisms of claims companies and lawyers if it is seen as a further example of the excesses of the compensation culture.”

Is this a bit of a legal hop, skip and a jump? (Watch out in case the old horse-hair syrup falls off!)

The FCA paper said 13 per cent did not understand that they would have to pay off a capital sum at the point of sale and another 6 per cent were unsure. However, only 2.5 per cent were both not aware at point of sale and currently do not have a repayment strategy in place.

So the borrowers found out somehow. Perhaps that world famous bloke down the Dog and Duck, who also reentered British political debate this week, offered the relevant advice.

Of course, there is also talk that alongside class actions, claims chasers are also sharpening their claims chasing knives or at least considering changing the message on their ‘orrible little automatic dialing machines.

But one thing to watch out for is whether after a campaign of class actions and people being prompted to (mis?)remember misselling, the numbers who don’t think they understood jump significantly higher.

And if they do what are we to make of it?

If this one gets up a head of steam and lenders and advisers start having to pay out, the Money Debate suggests we would be getting near to a zero fail regime whatever the regulator says is the case.

P.S. Been a little remiss about this. But thanks very much to all who nominated the Money Debate for financial blog of the year at the Headline Money awards this year. Our staff were unfortunately all struck down with a bug so couldn’t accept the kind offer of seat at the awards from the AIC this year. (We are not sure how all twenty of us we’re going to fit on one seat) Anyway in the 20th biggest shock of the night, we didn’t win this year with Investors Chronicle coming second and the Telegraph coming first. Congratulations media leviathans! But remember social media tankers find it very hard to change course. (Nope, we’re not sure what that means either.) However we’re feeling better and there’s always next year! (cue megalomaniac laughter).


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