When a potential borrower is introduced to a mortgage company, it is common for the introducer to be paid a commission by the lender. However, where neither the mortgage broker or lender inform you that a commission was to be paid, you may have a valid claim against either of them.

The Hurstanger Case

The body of law relevant to the question of ‘secret commission’ payments stems from a 2007 Court of Appeal case in the name of Wilson & Anor v Hurstanger Ltd [2007] EWCA Civ 299 (04 April 2007). In this judgment, the borrower Mr Wilson was introduced to Hurstanger Ltd by an independent mortgage broker. In addition to a broker fee that was added to the loan, Hurstanger also paid the broker a further commission of £240.

Although Mr Wilson was informed by Hurstanger that a commission was to be paid, they failed to disclose the exact monetary amount that was to be paid. Accordingly, the Court found that the mortgage broker was in breach of his fiduciary duty to the borrower. Equally, the Court found that Hurstanger, the lender, was an accessory to this breach, and effectively induced the broker to breach his duty. The Court ordered Hurstanger to compensate Mr Wilson up to the amount of the commission plus interest.

What Is A Fiduciary Duty?

When you engage the services of a professional from whatever discipline, they have a duty to exercise reasonable care and skill. However, in certain scenarios, the duty they owe you is significantly higher and the relationship between you is classified as a fiduciary one.

The classic test relating to fiduciary relationships is set out in the Court of Appeal judgment; Bristol and West Building Society v Mothew [1996] EWCA Civ 533. What this means for clients of such a professional is:

  1. A fiduciary is one that acts in circumstances where the relationship is one of trust and confidence
  2. You would be entitled to single minded loyalty from the fiduciary
  3. They must act in good faith
  4. They must not make a profit from the trust
  5. They must not put themselves in a position where their duty and interest may conflict
  6. They must not act for their own benefit without your informed consent

In summary, this means that if the professional advising you is paid a commission, and they have not informed you that they are being paid, you would likely be compensated the amount of that commission plus any associated interest. Also, depending on the circumstances of your case, you may be entitled to have the loan ‘written off’.

Secured Loans

A recent body of case law now means that credit brokers introducing and advising clients to enter into secured loans owe a fiduciary duty to the borrowers they introduce. Prior to 2008 it was extremely rare for either brokers or lenders to confirm both the existence and amount of commission paid.

If you entered into a secured loan prior to 2008 and were not informed that a commission was to be paid, contact Rowan Rose to see how we can help. 

To arrange a free initial consultation with one of the members of our Consumer Credit and Banking Litigation team, contact us online or by phone.

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