Tuesday 10 December 2019

No banks were fined over bad mortgage advice in boom times

BANKING ON IT: It was not unusual for lenders to persuade people to consolidate credit card and other personal lending into a new mortgage, creating the scandalous situation where a holiday financed on a credit card ends up being paid for over 30 years
BANKING ON IT: It was not unusual for lenders to persuade people to consolidate credit card and other personal lending into a new mortgage, creating the scandalous situation where a holiday financed on a credit card ends up being paid for over 30 years
Charlie Weston

Charlie Weston

They do things differently in other countries.

Take Britain. Royal Bank of Scotland (RBS) has been fined €18m by that country's Financial Conduct Authority for giving bad advice on mortgages.

Poor advice can cost someone their home, which means it is vitally important the mortgage advice banks and brokers give is fit for purpose.

The British regulator fined the RBS after it found it had given poor advice and displayed "serious failings" in its mortgage record-keeping.

The British exchequer rescued RBS in 2008 and that bank owns Ulster Bank here.

Ulster Bank, along with our own banks, engaged in a frenzy of lending up to 2008, much of it bad lending.

The fact that around 90,000 residential mortgage accounts are in arrears is evidence that bad mortgage advice was a feature here too.

It is known that mortgage record-keeping has slowly been emerging as a sour after-taste of the lending splurge since the collapse hit.

But it is somewhat shocking that not a single lender here has been fined, or sanctioned in any way, for doling out bad mortgage advice.

The Central Bank has confirmed that it has not taken action against any bank for bad mortgage advice.

And just five cases relating to mortgage mis-selling have been made to the Financial Services Ombudsman since the downturn. That is nothing short of extraordinary.

All of this is partly explained by the fact that property buyers were sometimes complicit in borrowing money they might have known they would struggle to repay if the economy experienced a contraction.

Borrowers sometimes conspired to hide credit union loans when it came to filling in mortgage applications and many claimed to be planning to take in lodgers, when they had no such plans.

That may be so, but it is pretty evident that many people were persuaded by banks to take out jumbo mortgages to buy homes they could not afford to repay, and encouraged to invest in buy-to-lets.

It was not unusual for lenders to persuade people to consolidate credit card and other personal lending into a new mortgage, creating the scandalous situation where a holiday financed on a credit card ends up being paid for over a 30-year period.

If that does not qualify as bad advice then woe betide us.

Many of these borrowers have been finding out that bad mortgage advice puts homes at risk.

Yet there has not been, and there is unlikely to be in future, any attempt to sanction banks and other lenders for bad advice.

This is yet more evidence that consumer protection has been sacrificed in favour of saving the banks.

In Britain they have rules. Here we have a bankocracy.

Twitter: @Cweston_Indo

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