IOM customers could launch lawsuit
A Financial Conduct Authority report last week into consumer’s ability to repay the loans found that up to 13% claimed they did not understand the terms of the loan at the point of sale.
Andy Millmore, partner at Harbottle & Lewis, said: “What is significant is that this leads to the question of why they did not understand and whether they were mis-sold with the strong possibility that many will believe that they were”.
“The problem in the past has been the cost of taking lenders and intermediaries to court.
“But since last month solicitors can undertake work on a true contingency basis, sharing in recoveries, this makes the prospect of legal action more likely in my view if groups of borrowers were affected in the same circumstances.”
“This report suggests that interest-only loans could represent a similar issue to payment protection mis-selling with the potential to secure very significant pay-outs.”
“In turn that could lead to criticisms of claims companies and lawyers if it is seen as a further example of the excesses of the compensation culture.”
The FCA report estimated that 600,000 people had interest-only loans due to mature before 2020.
Millmore continued: “If 13% of that group alone believes they were not properly informed about the risks and their responsibilities that is 78,000 people with a potential claim.
“But there are of course many more people with interest only loans maturing beyond 2020.”
According to the FCA one-third of the short-falls likely by 2020 are expected to be more than £50,000.