Legal Updates

Commercial Law – Financial Services Authority (‘FSA’) – Lifetime Mortgages

The Financial Services Authority (‘FSA’) recently fined the Minel Group Limited (“Minel”) £10,500 for exposing consumers to the risk of being sold unsuitable equity release (lifetime) mortgages. A lifetime mortgage is a form of equity release. In February 2007, the FSA wrote to firms carrying out low volumes of business in the lifetime mortgage market. The letter urged firms to consider what further steps need to be taken to ensure that customers are treated fairly in relation to their lifetime mortgages.

Minel, which is based in Newcastle Upon Tyne, now has to review its sales of lifetime mortgages from the 9th of November 2004 to the 9th of December 2005. This is to compensate customers for any loss caused by unsuitable advice. Minel has also agreed to stop selling lifetime mortgages.

This is the first time the FSA has taken enforcement action against a lifetime mortgage adviser. The FSA discovered persistent record keeping failures and systems and controls deficiencies during visits to the firm:

§   Minel had insufficient procedures for controlling its lifetime mortgage business and the quality of advice provided.

§   Minel also failed to record sufficient information about customers' personal and financial circumstances to establish their needs and objectives, and to demonstrate the suitability of its recommendations.

§   Despite lifetime mortgages being a higher risk product, Minel did not have any specific training and competence procedures for training staff or ensuring effective monitoring of competence.

The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000:

§   Maintaining market confidence;

§   Promoting public understanding of the financial system;

§   Securing the appropriate degree of protection for consumers; and

§   Fighting financial crime.

The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness. A spokes person for the FSA, said:

"We remain concerned about higher risk products like lifetime mortgages, and the FSA has been monitoring this aspect of the market since mortgage regulation began. Firms must have appropriate systems and controls in place to ensure that suitable advice is given on these products even where, as in this case, a firm is writing low volumes of business. This is the first time we have taken such action against a lifetime mortgage adviser, and the combination of a fine, a past business review, and ceasing all lifetime mortgage business should leave firms in no doubt that the FSA will hold them to account if they fail to treat their customers fairly".

Minel agreed to settle early on in the investigation and therefore qualified for a 30% discount of the fine under the executive settlement procedures. It is interesting to note that without the discount the fine would have been £15,000. Minel’s main business is commercial and buy-to-let mortgages and has been regulated by the FSA since the 31st of October 2004. Its authorised business includes advising on and arranging insurance and regulated mortgage contracts.

Please contact us for more information on assessing damages due under termination of a contract at


© RT COOPERS, 2008. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.   


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