Using online survey firm Usurv, Burgess asked 100 claims management companies to identify the next financial services mis-selling scandal; ironically 79% believe lenders’ failures to discuss or offer PPI or obtain an acceptable disclaimer could expose them to a compensation bill of around £1bn.
46% of mortgage lenders do not discuss or offer financial protection plans to borrowers and their reticence increases the risk of payment default - breaching their duty of care and contravening Financial Conduct Authority Mortgage Market Review guidelines which roll out in April .
He said: “Feedback from claims management firms suggest what is rife within the mortgage sector is equally widespread elsewhere. It’s a shame lenders aren’t acting prudently, discussing financial protection options and if they’re rejected, keeping a disclaimer on file. These simple measures could avert a second PPI-associated catastrophe.”
The FCA appears equally reticent to help its members ‘head-off’ more compensation claims.
A spokesperson said: “The Mortgage Market Review aims to ensure that consumers get a mortgage they can afford; this means lenders will be looking carefully at customers’ financial situations before agreeing a mortgage.
“Ultimately it is a personal decision for the consumer to take advice and decide whether they need the extra cover provided by a financial protection plan, and the FCA is not doing anything to prevent this. The decision to sell these plans is a commercial one for businesses.”
Burgess added: “It’s interesting the FCA encourages lenders to look carefully at ‘customers’ financial situations’, but not debt prevention measures.
"Isn’t this part of that ‘financial situation’? And how can it be ‘a personal decision for the consumer to take advice’ if they’re not offered it in the first place?
"Customers don’t know what’s available. I believe the FCA is failing in its duty to protect consumers.”