As the number of Data Subject Access Requests channelled through lawyers and claims managers to intermediary firms, where the consumer had an interest only mortgage, sails towards 5,000 there are huge impacts on firms. These fishing expeditions to see what is on file are very different to the historic PPI market. There the DSAR fell on lenders who self-insure and pay from income. With mortgage intermediaries, the DSAR indicates the likelihood of complaint or legal action therefore requires the firm to inform their Professional Indemnity (PI) Insurer who may well require the response to be reviewed by their lawyers.
This incurs a cost on day one as the legal fees will fall under the policy excess. So, a small firm receiving 10 of these could have costs of circa £20k without anything substantive to defend. This is a direct hit to profit. We would expect the professional firms working on these, whether solicitors or FCA regulated CMCs, to be more sensitive to this than they appear. We hope that they are only working on genuine cases of consumer complaint and not being generated by promotional work promising free money.
AMI is working with member firms on these cases as they develop and any firm receiving a request should speak to their PI insurer first. Of more concern is that we are hearing that some mortgage holders have entered into agreements which finance the work being done on their behalf and that it is difficult to exit these agreements. In that most of these mortgages will have been properly sold, that is a real concern.
As many of these cases could be time-barred that will leave these consumers with the costs. Also, this is a product well reviewed by the FSA and FCA and still on sale. Consumers have been getting public warnings on the product and notes from lenders on the need to talk to them. This is also a product where if the customer wants to reduce the capital they can usually over-pay within the terms of the contract. I still struggle to see the loss most of these consumers have unless they have been cash rich and not borrowing other money.
Robert Sinclair
Chief Executive, AMI
August 2020