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FSA takes action against three mortgage brokers for management failings

The FSA has taken action against three mortgage brokers for management failings, fining two firms £10,500 each.

Lawrence Scoffield Mortgages Limited and Council Homebuyers (Midlands and North) Limited have each been fined £10,500.

Mortgage Network Solutions has been given a public censure.

Both LSML and CHL failed to exercise adequate management and control over their sales processes and MNS failed to make and retain proper records relating to its customers’ needs and circumstances and to keep adequate records of its Training and Competence procedures.

The FSA has instructed LSML, CHL and MNS to carry out a past business review. All three firms agreed to settle at an early stage of the FSA’s investigations. LSML and CHL qualified for a 30 per cent discount under the FSA’s executive settlement scheme. Were it not for this discount the FSA would have imposed a financial penalty of £15,000.

The firms were among 65 mortgage brokers visited between June and October 2006 as part of the quality of advice process thematic project. In all, the project reviewed 252 firms of various sizes through mystery shopping, questionnaires and visits to establish a baseline on the way advice is delivered in the mortgage industry. The review found there was scope for improvement among firms in all aspects of the advice process.

Head of retail enforcement Jonathan Phelan says: “It is essential that firms implement and maintain robust processes to ensure they recommend suitable mortgage contracts and treat their customers fairly.

“Poor processes of the kind we identified in these mortgage brokers meant there was a risk of unsuitable mortgage contracts being recommended, either because the advisers were not appropriately qualified and supervised or because the assessments of the customers’ needs and circumstances were incomplete or poorly documented.”

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