Glossary-of-terms-banner

The following glossary will help you understand the meaning behind terms currently used on this site.

Mis selling

The ethically questionable practice of a salesperson misrepresenting or misleading a customer about the characteristics of a product or service. In an effort to make a sale to a potential customer, a financial products salesperson could leave out certain information or describe a financial product as something the customer urgently needs, even though sound financial judgment would come to the opposite conclusion. Mis selling can be seen in many forms including with mis sold mortgages.

Mortgage

A mortgage is a loan to purchase a property. A mortgage loan uses the property as collateral to guarantee repayment of the loan.  If the loan is not repaid the lender may repossess the property in order to reclaim the debt.

PPI

PPI or payment protection insurance is a form of insurance that in theory covers your finance repayments on a financial commitment if you can’t work either through illness, an accident or if you are made redundant.  In reality however the majority of policies sold are ineffective due to the ineligibility of the customer for the product at the point of sale. This situation has led to mis sold ppi, payment protection insurance claims and therefore ppi insurance refunds.

Self Certified Mortgage

A mortgage granted on the basis of a borrower’s statement of their income rather than an employer’s or accountant’s statement. Self-certified mortgages are usually granted to self-employed people whose income varies during the year and those with bad credit ratings.

Sub Prime Mortgage

A type of mortgage that is normally granted to borrowers with lower credit ratings. As a result of the borrower’s lowered credit rating, a conventional mortgage is not offered because the lender views the borrower as having a larger-than-average risk of defaulting on the loan. Lending institutions often charge interest on subprime mortgages at a rate that is higher than a conventional mortgage in order to compensate them for carrying more risk.  Sub Prime mortgages are not offered by traditional “High Street” Lenders.

Office of Fair Trading

The Office of Fair Trading (OFT) is a not-for-profit and non-ministerial government department, established by the Fair Trading Act 1973, which enforces both consumer protection and competition law, acting as the UK’s economic regulator. The OFT’s goal is to make markets work well for consumers, ensuring vigorous competition between fair-dealing businesses and prohibiting unfair practices such as rogue trading, scams and cartels.

FSA

The Financial Services Authority (FSA) is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government.  The Financial Services and Markets Act 2000 imposed four statutory objectives upon the FSA:

  • market confidence: maintaining confidence in the financial system;
  • public awareness: promoting public understanding of the financial system;
  • consumer protection: securing the appropriate degree of protection for consumers; and
  • reduction of financial crime: reducing the extent to which it is possible for a business carried on by a regulated person to be used for a purpose connected with financial crime

Financial Ombudsman

The financial ombudsman service is an independent statutory body established by parliament as a financial expert to settle individual complaints between consumers and any businesses providing financial services. It is a free service used where the consumers are unable to resolve by issues on their own.  The Financial ombudsman or FOS is often used to mediate PPI mis-selling claims.