M2 Recovery were instructed on behalf of RBS to undertake an insurance audit on a portfolio of properties that had fallen into default as the bank had suspected that secret commissions had been paid as part of the insurance arrangements that were in place.
The borrower had insured the properties through their preferred broker with RBS noted as coinsured on the policy. During the period the properties were in default the broker had maintained insurance cover and RBS had paid the premiums on behalf of the borrower.
“It was established during the course of the audit that the broker had entered into a commission sharing arrangement with the borrower, which was now in default,” said M2 Recovery founder and managing director Neil Holloway.
“The broker maintained this arrangement with the borrower while the premiums were being paid by RBS, meaning that a proportion of the premiums paid by the bank were being diverted to the borrower.
“The broker had a duty of care to RBS to advise them of this arrangement. Failure to do so created a secret profit and ultimately the broker was required to refund to RBS the secret commissions it had paid to the borrower.”
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