Mortgage intermediary firm, Principal Mortgage Services Ltd (Principal) and the firm's chief executive, Terence Harrop , have been subject to enforcement action by the FSA for breaches of Principle 6 and Principle 7 of the FSA's Principles for Businesses.
Between 2004 and 2010, under Harrop's command, Principal advised hundreds of its customers to take out interest-only mortgages with an unregulated mortgage accelerator plan. However, these products were sold without any consideration of the suitability of the interest-only mortgage for each customer. Furthermore, the information supplied to the customer about the unregulated mortgage accelerator plan was misleading and omitted relevant information. Principal misrepresented to its customers that their funds would be ring-fenced but failed to ensure that this was actually the case. This led to customers losing 45% of their funds held in the unregulated mortgage accelerator plan when Principal went into liquidation in 2010.
Principal had its Part IV permissions cancelled and would have been fined £70,000 had it not been in liquidation. Mr Harrop has been deemed lacking in competence and capability and has been banned from performing any further regulated activities.