Equity release mortgages are becoming a serious issue, in terms of mis-selling. The FCA recently launched an investigation into these mortgage products, and their findings revealed the scale of the problem. Here’s some information about the current situation, and the steps to take if you want to lodge a formal complaint.
The FCA’s findings
The FCA carried out an investigation on equity release mortgage providers, after they received numerous complaints from consumers. They discovered the following:
- In some cases, the mortgages were working well for customers, and there were no obvious problems.
- In other instances, it was difficult to tell if the advice benefitted the customer or the advisor.
- The advice wasn’t always personalised to the customer.
- Financial advisors weren’t always challenging consumer assumptions.
- Advisors weren’t providing evidence to back up their mortgage product recommendations.
Particular concern was raised for vulnerable customers, who may not have been aware of exactly what they were agreeing to.
What to do if you believe you’ve been mis-sold to
If you’re worried that you might have been mis-sold to, here are the necessary steps to take.
Step One – Check that it’s actually an equity release mortgage
If possible, find the original documentation, detailing the exact nature of the loan. Don’t worry if you don’t have these documents; your mortgage provider is legally obliged to supply you with the necessary details.
If you’re trying to find out on behalf of a relative (e.g. if they’re deceased / unable to contact the mortgage provider themselves), you may need proof that you’re their next of kin in order to access the information.
Step Two – Assess the way your mortgage was sold to you
If you’re not sure whether you’ve been mis-sold to or not, ask yourself the following questions:
- Did you receive all the information you needed about the equity release mortgage?
- Were you told about all the costs involved (including hidden fees and compounded interest etc.)?
- Did you feel comfortable with the process?
- Were all the risks explained to you, and did the advisor assess your attitude to risk?
- Did they emphasise that the equity release mortgage was to provide necessary funds for your retirement, not for splashing out on luxury items (e.g. holidays)?
If you answered ‘no’ to any of the above, you may be in a position to make a complaint.
Step 3 – Get in touch with your mortgage provider
Sometimes, issues can be resolved without having to get anyone else involved. Contact your mortgage provider, outlining as clearly as possible (with evidence, if you have any) where you think mis-selling has occurred.
In some cases, this is all it takes to settle matters quickly and amicably. However, if you’re unsatisfied with their response, or they fail to respond altogether, you’ll need to proceed to the next step.
Step 4 – Contact the Financial Ombudsman Service (FOS)
When you get in touch with the FOS, you’ll be asked to provide as much information as you can about the situation. It’s possible that they may ask further questions, or request to see certain documents to gain better understanding of what has happened.
They’ll then carry out an investigation; speaking to all parties involved (e.g. the mortgage providers, plus independent advisors, if applicable). After examining the situation in depth, they’ll reach a verdict on whether you’re in a position to seek compensation or not.
Step 5 – Get compensated for your financial loss
If the FOS believe that you’ve been mis-sold to, they’ll request that the mortgage provider does one of the following:
- Compensate you financially, with consideration given not only to monetary loss, but also to distress and inconvenience caused.
- Refund the early repayment charge, if it was issued when you (or your relative) had to move into residential care or downsize to a smaller home. They may be asked to pay the interest too.
- Request that the mortgage provider returns you (or your relative) to the financial state you were in before you took out the equity release mortgage.
The exact nature of the compensation will depend on the level of mis-selling and how much it has adversely affected your (or your relative’s) life.
The Equity Release Council have a wealth of information on their site, regarding what to expect from an equity release mortgage, and the responsibilities your financial advisor has when selling you the product. You can access it here.