Millions 'financially deceived' by banks, insurers and advisers

Millions of Britons could have been victims of secret commissions, incorrect fees and interest charges and could be entitled to compensation.

The problem surrounds whether brokers providing mortgages, secured loans and lump sum payments for mortgage and protection policies (ASU policies) were upfront over the fees received from lenders and insurance companies.

Consumers paying brokers a fee could be entitled to compensation if the broker did not inform them they were taking a 'proc fee' from insurance companies or lenders.

"This could be bigger than endowment policy misselling," said Andrew Callen, at Powell Callen Solicitors.

He estimates the scandal could affect as many as 40 lenders – with the largest making £1 billion in fees.

A Court of Appeal ruling last year stated: "If there has been no disclosure - the agent will have received a secret commission. This is a blatant breach of his fiduciary duty but additionally the payment or receipt of a secret commission is considered to be a form of bribe."

Powell Callen Solicitors estimates claims for losses typically amount to between £5,000 and £15,000, with some claims settling at nearly £40,000.

Problems arise as some brokers may state they may take a fee – although not being clear. In these cases the courts will still find in favour of consumers, but to a lesser degree, claimed Mr Callen, with the fees returned to the consumer with interest.

However, if no fee taking is made clear, consumers could see larger paybacks or even loans and insurance policies cancelled with damages paid.

The main areas of firm misleading consumers are identified as:

• 1. Loans under £25,000 taken out in the last seven years or loans of £15,000 or less before the year 2000.
• 2. Unregulated loans that were improperly executed.
• 3. The law of agency between financial advisor/broker in secret earnings/commissions.
• 4. Charges for single premium insurance to protect mortgage payments with secret and excessive commissions therein.

Mr Callen said: "Numerous cases have succeeded at these levels of damages and in some cases the loans cannot be enforced to recover by the lender.

"In a lot of cases the claims for losses typically amount to between £5,000 and £15,000 with some claims settling at nearly £40,000."

He advised people thinking they may be affected to turn to a solicitor specialising in the areas – as approaching firms directly could result in being "fobbed off or only get a small part of compensation".

Daniel Barnes