Advice for unregulated finance brokers facing financial penalties

Updated: 3rd December 2021

Advice for unregulated finance brokers facing financial penalties

Unregulated finance brokers are finding themselves subject to increasing levels of legal action regarding deals they brokered many years ago. This type of litigation concerns the alleged mis-selling of a whole host of finance products, ranging from personal finance options such as bridging loans and mortgages, through to commercial borrowing including loans and asset-based lending.

The scale of this is such that some believe this to have the potential of being the next Payment Protection Insurance (PPI) mis-selling scandal which saw banks having to pay out billions of pounds to customers who had signed up in these schemes.

What is the current situation?

The issue currently unfolding is that unregulated finance brokers have begun to see legal action being commenced against brokers in instances where irregularities are found in the original paperwork. The problem here is that these irregularities were common practice within the industry meaning a huge number of brokers could find themselves affected. For example, a noted irregularity is where the signature was given over a Skype call, for instance, rather than through more traditional means.

What does this mean for finance brokers and lenders?

If any discrepancies were found this would typically mean that the finance company, rather than the broker, would be responsible for providing any necessary compensation due to the customer.

However, it is common that a clause is written into many contracts of this nature between the lender and the broker which states that if there are any irregularities found then the finance company is within their right to take this up with the brokers to recoup their losses.

Unregulated brokers could potentially find themselves facing claims that collectively run into millions of pounds. On an individual level, this could push a broker to breaking point should the level of compensation demanded be too large for the company to deal with.

What should you do if you are affected?

If you are an unregulated finance broker who is worried about an impending fine or penalty, the advice is the same we would give to any company experiencing financial difficulties which is to contact a business rescue expert as soon as possible. A licensed insolvency practitioner will be able to talk you through your current situation and explain the impact any impending fines are likely to have on your company’s financials.

We will be able to ascertain your company’s capacity for paying any compensation owed, and from there help you understand the options open to you and your company. This may involve a formal restructuring of your liabilities through a Company Voluntary Arrangement (CVA), information negotiations with creditors, or if the company is no longer a viable entity we can help facilitate an orderly wind down via a Creditors’ Voluntary Liquidation (CVL).

Call our team today on 0800 644 6080 to arrange a free no-obligation initial consultation with a licensed insolvency practitioner. With 100 offices across the country you are never far from expert help and advice.

Julie Palmer

Regional Managing Partner

0800 644 6080
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