The Financial Services Compensation Scheme has declared five mortgage advice firms in default, including failed mortgage network Network Data.
The four other firms are PMSG Insurance Services Limited (also trading as Professional Mortgages Services Group), Financial Quest UK Limited, Finance Direct (UK) Limited, First Class Mortgages Limited. The FSCS says it has so far received 15 claims across all five firms totalling around £118,000.
Network Data went into administration in May 2009 ,owing appointed representatives £2m in commission.
PMSG Insurance Services was fined £35,000 by the FSA in July 2008 for failing to ensure suitable advice to customers. The regulator found at least 620 customers were exposed to the risk of being recommended mortgages they could not afford or did not need. It withdrew approval for the firm’s compliance officer, Irene Hall. The firm went into liquidation in 2008.
Financial Quest UK Limited and Finance Direct (UK) Ltd went into liquidation last year.
In 2006, the FSA withdrew the permission of First Class Mortgages Limited director John Stanley Lepine, deciding he was not a fit and proper person to carry out regulated activities. The firm went into liquidation in 2009.
The move opens the door to compensation claims from clients who have lost money through dealings with these firms.
The FSCS says that due to a recent change in the compensation limits, the maximum amount that consumers may be able to claim varies.
For mortgage advice and arranging, the maximum level of compensation for claims against firms declared in default before January 1, 2010 is 100 per cent of the first £30,000 and 90 per cent of the next £20,000 up to £48,000 per person per firm.
However, if a firm was declared in default on or after January 1, 2010, the new compensation limit is 100 per cent of the first £50,000 per person per firm.
FSCS director of operations Kate Bartlett says: “The FSCS’s role is to help people who have lost money as a result of doing business with an authorised firm that is unable or likely to be unable to meet claims made against it.
“The FSCS helps to instil confidence in the financial services sector by ensuring consumers get the compensation they are entitled to when this happens.”