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6K fee is revealed on 77k homeloan

Claim firm alleges that mortgage case commission was undisclosed

GE Money Home Lending could face a barrage of compensation claims after allegations that advisers previously failed to disclose commission payments on sub-prime mortgages and loans.

Money Marketing has been shown documents by claim firm Loancheck which highlight two cases of alleged undisclosed commission by GE subsidiaries.

Loancheck claims it has dozens more cases against GE that it will take up when it launches fully in September.

The claims predate mortgage regulation which was introduced in 2004.

One complaint is against Igroup, which was bought by GE Capital in 2001. This claim is about a mortgage secured in 2003 while a complaint against Home Funding Corporation predates GE’s ownership.

In one case, Loancheck claims a Kent couple, Adele Aylwin and her husband Keith, since deceased, took out an 77,000 Igroup homeloan in 2003 but were only informed the broker was earning a 3,000 fee although it is is alleged the intermediary was paid an additional 3,864 for selling the mortgage and payment protection insurance plan.

GE claims that it has a booklet signed by the Aylwins which it can shortly produce which did disclose the commission.

In another example, on a 50,500 Home Funding Cor- poration mortgage, another borrower, Tim Christian, was allegedly told of the 2,000 fee but not the additional 2,625 commission.

GE says it is still searching for information on the case.

Legal expert Goldsmith Williams senior partner Eddie Goldsmith believes that if any claims are successful, it could open the floodgates for similar compensation bids. He claims that the common law of agency states that lenders and brokers must be transparent and disclose earnings and payments, regardless of regulatory rules.

Loancheck is likely to target lenders rather than brokers and is asking intermediaries and IFAs to tell it about lenders that have paid secret commission.

Edeus chief executive Michael Bolton claimed in July that backhanders were rife in the sub-prime mortgage market.

Goldsmith says: “If a lender has been paying commission to someone and it is not disclosed, then the person rec- eiving it could be required to pay it back or the lender may be liable.

“If clients find out that commission has not been disclosed, those clients could seek compensation. There could be demons in the woodshed.”

AM Mortgages and Finan- cial Services adviser Angela Melanophy, who passed Adele Aylwin’s case to Loancheck, says: “This puts a bad taste in people’s mouths.”

Loancheck requested details on both cases in 2003, after receiving customer permission, which it says gave GE the opp- ortunity to produce evidence to deny either claim, which Loancheck says it failed to do.

A GE spokesman says: The law of agency, under both MCCB and FSA regulations, is based on common law principles and states that the broker, as the borrower’s agent, is ultimately responsible for disclosing commission amounts.

“However, as a responsible lender, we are committed to looking after our customers and ensuring that they are kept informed. As part of that process, igroup has, and still has, specific documents which have to be signed by the customer before the loan is paid out.

“The purpose of these documents – the customer care booklet and mortgage information booklet – is to confirm the broker and lender’s commitments to the customer.

“In addition, igroup was one of the first lenders to install pre-completion telephone calls, guaranteeing the customer is fully aware of the details of their loan agreement and are comfortable with the terms that they are agreeing to.

“We take all individual cases seriously and fully intend to investigate this further.”

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