Firing line  

Firing Line: Rob Cooper

“A lot of people were sold high [loan-to-value] interest-only mortgages [and] were mis-sold in every sense of the word because the broker broke [the FCA’s Mortgage Conduct of Business] rules. 

“Interest-only mortgages were designed for sophisticated people to put their capital to work in the market, pay down the capital at the end of it, and benefit from the investment.”

Vulnerable borrowers

Unfortunately a lot of the wrong people were sold this type of mortgage, with no checks in place to determine if they could repay the capital at the end of the term.

Mr Cooper says: “The only way they could get the capital is to sell the home and they [would] be homeless.

“[This is] what the FCA would term a ‘financially vulnerable’ sector. These are people who have a choice between heating and eating, it’s very much about the here and now. Having taken out an interest-only mortgage – if they’re aware they took out an interest-only mortgage – they weren’t aware it was a problem.”

In some instances it was a blatant disregard for the client’s interests, especially if the client was saddled with debt.

Mr Cooper says: “In the run-up to the financial crash, credit standards were very weak; you were being given car loans and credit cards, people were borrowing well beyond their means.

“They would go to a mortgage adviser and say, ‘I need to do something about this.’

“As an adviser, if you’re not able to find a suitable product, you should have sent the client to a free debt advisory service, but you’re not earning anything from that.”

Instead, many advisers repackaged the credit card debt into a new mortgage, so that the monthly payments fell but all the adviser did was extend the loan.

But many people simply do not know about the Fos and how it works, or the FSCS. 

Mr Cooper says: “They can’t go through the ombudsman or the FSCS because they don’t have the confidence or the skillset.”

But these are the last people to have been paid attention from the misdeeds of the credit boom pre-crash, says Mr Cooper.

“The only person that hasn’t been redressed is the financially vulnerable consumer who has been left to pick up the tab, in more ways than one.”

Melanie Tringham is deputy features editor of Financial Adviser and FTAdviser.com