A couple of months ago, I looked at the issue of complaints made against mortgage intermediary firms, the numbers since the Financial Ombudsman Service (FOS) took over jurisdiction, and the Association of Mortgage Intermediaries (AMI) response to the FOS funding review consultation currently taking place. Complaints have not gone away just because firms are governed by the prescribed rules of MCOB. Indeed, as I mentioned in my previous article, they tend to rise following the statutory regulation of the sector.
Steady but moderate
We have now had nearly two years of MCOB and the FOS tells us it has seen a ‘steady but fairly moderate stream’ of cases involving mortgage intermediaries. The latest issue of Ombudsman News (available to download at http://www.financialombudsman.org.uk/publications/ombudsman-news/55/55.htm) contains the FOS’s experiences of dealing with complaints involving mortgage intermediaries, some key points for intermediary firms who may have to deal with the FOS and a number of case studies outlining its approach and the results reached.
The FOS tells us complaints involving mortgage intermediaries have generally been concerned with matters such as advice, charges and administrative failings. Effectively similar types of complaints to those that have been levied against mortgage lenders. The relatively good news for intermediary firms is that most of these complaints have been resolved informally at an early stage in proceedings, and the FOS has been pleased with the conduct of brokers who, on the whole, have been ‘happy to discuss cases (and how to resolve them)’ with its staff.
The article specifically refers to smaller mortgage intermediary firms and their need to have more information provided by the FOS on the different stages of the process and be kept regularly updated on their case. The FOS also believes some smaller firms – especially those where the person dealing with the complaint is the same individual the complaint has been made against – are having difficulty operating with ‘professional detachment’. There is concern this ‘lack of objectivity’ is increasing the amount of time it takes to produce an outcome to the complaint.
Response
AMI agrees that smaller firms are unused to dealing with the FOS and when a complaint is made there is a real anxiety and concern of the consequences and possible outcome of the case. This accounts for the length of time the firm tends to spend discussing and preparing for the case with the case handler and the time needed to explain the outcome fully with the firm.
As part of AMI’s response to the recent FOS funding review, we recommended the establishment of a ‘Small Firms Division’ in the same way the Financial Services Authority (FSA) has. This team would deal with the small firm cases and would be in tune with the particular needs of smaller firms who will not be as au fait with the FOS process and will need more assistance in piloting a complaint through the system. It should be possible for this ‘Small Firms Division’ to look at the communication needs these firms have, and provide more training and assistance. They may even wish to go further and allow oral hearings, with a specific process being established by which this could occur.
The FOS also outlines how it is still dealing with a number of ‘transitional complaints’ – those made after intermediaries came under the FOS’s compulsory jurisdiction but concerning ‘events that happened at an earlier date’. The FOS can deal with such a complaint if the firm had previously been covered by the Mortgage Code Arbitration Scheme (MCAS), and applies the standards that existed at the time, i.e. those of the Mortgage Code. It does not regulate retrospectively. But if a firm was not covered by MCAS, the FOS cannot deal with a complaint that relates to an event that happened pre-statutory regulation. The FOS has also stressed that written records are asked for when dealing with a transitional complaint even though there was ‘no specific record regime in force at that time’. This is because written records are ‘normally very persuasive evidence’ when deciding on the complaint’s outcome.
Key points
Ombudsman News also includes key points that intermediary firms may find helpful and some recent case studies which could give firms a steer on the way the Ombudsman deals with complaints made against mortgage intermediaries. These include:
Whether a broker’s actions were responsible for customer’s adverse credit rating and inability to obtain as low a rate of interest as expected.
Whether a broker’s delay in processing a mortgage application resulted in the customer having to pay a substantially increased price for her property.
Whether a broker failed to meet a consumers’ timescale for arranging their mortgage, resulting in additional costs for them.
Whether a broker acted correctly in charging a fee even though they never completed the customer’s transaction.
Whether the FOS can deal with a complaint about a mortgage for an investment property taken out before mortgage brokers joined our compulsory jurisdiction.
Whether an intermediary misled customers about the amount they could borrow and the time required to process their application.
The article and the case studies will give members an idea of how the FOS handles such cases. I would recommend that all intermediary firms take time to read this section of Ombudsman News. Following the publication of this information, AMI will be updating its Complaint Handling factsheet.
Rob Griffiths is associate director of the Association of Mortgage Intermediaries (AMI)
