The Financial Ombudsman Service (FOS) has yet to trouble most mortgage intermediary firms. Indeed, in a market that saw over 1 million completions last year, FOS only received around 400 complaints. The phrase ‘hardly a blip on the radar’ springs to mind. Long may this trend continue.
However, being the ex-boy-scout that I am, I am a firm believer in ‘be prepared’. Firms should think carefully now about how to stay ahead of the ‘claims-wave’ and on the right side of FOS decisions. A good way to do this is to subscribe to the FOS regular newsletter. I am sure Rob Griffiths and the team won’t mind me plugging another publication in this esteemed journal. After all, Mortgage Introducer is hardly a competitor to the FOS.
Get the news
Ombudsman News is free and can be downloaded or ordered from the Ombudsman’s own website (www.financial-ombudsman.org.uk). This free newsletter provides the latest news from FOS and some very helpful case studies of complaints and how FOS has handled them. Indeed, this is a special edition of Ombudsman News as it celebrates its 50th edition. Better news for mortgage intermediaries is there are some useful case studies which firms should ponder on carefully as there are some useful pointers.
One of the main features in the newsletter concerns banking complaints. The case studies detail how FOS handled some interesting cases including: those with unusual or onerous terms, unfair contracts, what is meant by real consent, and terms that do not form part of the contract. These provide an interesting insight into the workings of the Ombudsman that may be appreciated by firms who are yet to come across FOS but who have recognised that in our increasingly litigious world, it may only be a matter of time before someone complains to the Ombudsman about not the advice given but the colour of the tie worn by the person who gave it. Of course the good news with this is that, on this particular case at least, the complaint could be dismissed as ‘frivolous’ and no case fee would be payable – but it’s always worth checking.
Clarity of information
Two interesting case studies that are worth a quick review deal with clarity of information. In the first case a lender had not brought a loan’s early repayment charge fairly and reasonably to a customer’s attention before making the mortgage loan. In this instance the Ombudsman upheld the complainant’s case as they judged that an early repayment charge was an onerous contract term and so the customer could only be bound by it if the lender had brought it fairly and reasonably to his attention before he had entered into the contract.
There does not seem to have been an intermediary involved in this case – but it is worth considering a key question. If the customer had been advised by a mortgage intermediary, who would he have complained about – the lender or the firm that gave him the advice. It is unfortunate but the Ombudsman cannot look at ‘shared guilt’ as it rules on the case brought by the complainant against a particular firm. The message is clear – as advisers it is the duty of firms to point out clauses that may be judged ‘onerous’ by FOS and not simply rely on lender information.
The second case is also noteworthy. In this instance it appears the firm involved did not supply the customer with details of the early repayment charge until after the deal had been signed. Again, FOS ruled in the customer’s favour.
Protection
There are other cases where the FOS ruled in favour of the firm but the reason for highlighting these two is to make the point that firms need to carefully consider their duty of care and their own protection.
As regards this second point, it is well worth repeating the FSA’s recent finding that the firms they visited did not have sufficiently robust record-keeping to prove why the mortgage advice they gave was sound. The fact that each of the advisers questioned could verbally explain the case and their recommendation only redresses this point if you believe no one ever falls ill, takes a holiday or leaves their current firm. Good record-keeping is, in my view, not only good business sense but also makes for better results if you are unlucky enough to have an Ombudsman complaint.
Even more than this, a firm with good record-keeping and system and controls is in a better position to prove to their professional indemnity insurer they are a lower-risk business – and hence can justify why they should receive a lower premium.
Ombudsman complaints should not feature too heavily in the mortgage sector for the foreseeable future as we remain a low risk, low financial loss, low complaints industry. We can learn by the experience of other sectors though and ensure we are prepared in case of complaints.
