In Wilson v Hurstanger, the court found that £240 commission paid by lender Hurstanger to Coventry loan broker One Way Finance, who also charged his client a £1,000 fee on a £7,000 loan, should have been fully disclosed.
Law firm Fishburns solicitor Harriet Quiney believes that buy-to-let mortgage brokers charging fees and getting commission could face legal challenges.
ABI protection review chairman Nick Kirwan says despite the fact fee-charging advisers do not have an FSA require-ment to disclose commission, the court’s interpretation of the law of agency in this case means advisers and providers will have to do so in future.
He says: “Insurers may have to make the decision to disclose commission because they do not know which advisers charge fees and which don’t. They will have to disclose across the board to prevent the whole transaction being nullified and having to pay back premiums.”
Kirwan says many fee-based advisers are unaware of their agency obligation to disclose commission and consider they are working above board.
Quiney says: “This decision will apply to regulated and unregulated sales involving third-party brokers. 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, in particular, buy-to-let mortgages.”