Undisclosed Commission
Were you mis-sold your secured loan? Are you eligible to claim due to your brokers actions?
A Court of Appeal case in 2021 means that if you were unfairly sold your Secured Loan you could have that loan Unwound or Rescinded, resulting in potentially thousands of pounds paid in interest and charges returned to you.
Many Brokers accept a fee from the lender to secure business for them. If this fee wasn’t disclosed to you, it could mean that you entered into a loan agreement that was unfair to you. You didn’t have all the facts. Were you able to choose the best deal available to you at the time or were you sold a loan that the broker/lender wanted you to choose? You may have paid more than you should have as a result.
Secured Lending
Many Homeowners will need to lend money from time to time, whether it’s for long awaited home improvements or possibly debt consolidation. Secured lending allows access to larger sums than personal loans, with the capital lent secured against the value of their home.
Borrowing tens of thousands of pounds is a huge commitment, potentially only second to securing a mortgage. Many Consumers will turn to a Credit Broker, trusting them to secure them the best deal. Often paying a large fee for their services.
Fiduciary Duty
A fiduciary duty exists in law when a person places their trust, confidence, and reliance on another to exercise discretion or expertise in acting in their best interests. By paying a Credit Broker their fee, the borrower is creating a fiduciary relationship where the broker has a duty to the borrower and must act in the Borrowers best interests to secure them the best deal possible.
Conflict of Interest
In addition to a broker fee from the Borrower, many Credit Brokers also accepted payment from the Lender for securing business for them. Typically, this payment would have been made as a separate fee or a percentage of the loan (which could also include bonuses for the value and number of loans secured by the broker through multiple clients). These payments have benefitted the Broker’s (fiduciary) interests or the interests of a third party (Lender) instead of their Client’s (Borrowers’) interests. How can a Credit Broker act in the Borrowers best interests if they are accepting payment for obtaining the loan by the lender? Would they have directed the borrower to that Lender without that payment?
Breach of Fiduciary Duty
Having entered into an agreement to secure the services of a Credit Broker, the Borrower should be confident that the broker should find a loan that is in the Borrowers’ best interests.
In all cases, disclosure of any potential conflict of interest (such as a payment for securing business) is important in a fiduciary relationship because any conflict can be seen as a cause for a breach of trust. A breach of trust can make the whole agreement unfair and possibly unenforceable.
Non-Disclosure
Non-Disclosure is where important information is kept hidden, or secret, usually by not appearing in the terms and conditions of borrowing. It stops clients making informed choices. Often, especially between 2000-2010, the fact the Lender would pay commission to the Credit Broker was not disclosed to the Borrower at all. However, over time, largely due to successful Court cases such as Plevin or McWilliams, lenders have improved their disclosure to borrowers about the commissions paid leading to various levels of non-disclosure. These can now be classed as Wholly Secret, Partially Secret or Fully Disclosed. If the Lender fully disclosed the commission paid, i.e. the Borrower knew how much commission would be paid to the Broker then the breach of trust is removed.
Civil Remedies
After the Court of Appeal cases of Wood & Pengelly, where it can be proven that the borrower is at a disadvantage due to an unfair relationship, or breach of fiduciary duty, then the court can order the agreement be Unwound or Rescinded.
This means that the borrower should be put back into the position that they would have been in had they not taken the loan and is returned many thousands of pounds of interest payments as well as all charges and fees.
To be unfair the Borrower must have been at a disadvantage due to a breach of trust caused by commission payments and non-disclosure of those payments. For many Borrowers it means that they may not have got the best deal on their secured loan and subsequently it cost them more than it should have.
