One in four mortgage brokers ignoring sales regulations
Published 28/02/2013 | 05:00
AN estimated 550 financial intermediaries are losing money selling investments, mortgages and insurance products, an official report has found.
The financial crisis has seen more than 1,500 intermediaries leave the business since 2010, a report due out from the Central Bank today is set to show.
And a quarter of the 3,300 brokers regulated by the Central Bank are also selling products and services they are not authorised to sell by regulators.
These include mortgage advisers who are also estate agents and car garages that are selling payment protection insurance as well as motors.
But it is the large numbers of brokers that are losing money that is worrying regulators, the Irish Independent has learnt.
All financial intermediaries are required to send a copy of their audited accounts to the Central Bank.
However, the first full examination of the retail intermediary sector found that 17pc of brokers are recording losses. This works out at about 550 intermediaries, according to the '2013 Report on the Retail Intermediary Sector in Ireland'.
In the case of almost 100 brokers the annual losses are more than €100,000 each.
Central Bank director of consumer protection Bernard Sheridan said the clear evidence of financial strain in the sector posed risks for consumers.
"I would urge firms to ensure that while working to return to profitability, no actions are taken which could lead to additional risks for consumers," Mr Sheridan said.
There are fears that brokers who are losing money may be tempted to keep client money they are supposed to pass on to insurance and investment companies on behalf of consumers.
Mr Sheridan also warned brokers to give consumers any rebates they are due from insurers when a policy is cancelled.
Consumers could end up having to make a claim to the Investor Compensation Company if a broker closes down and has not issued a receipt for money it got from the consumer.
And there is a fear that loss-making brokers are skimping on professional indemnity insurance.
Last year the Central Bank was forced to issue what it calls a direction to 80 intermediaries ordering them to put professional indemnity insurance in place.
The first comprehensive survey of the sector also found that large numbers of brokers are small, one-person operations.
More than half of the firms surveyed from the returns they make to the Central Bank have income levels at less than €60,000 a year.