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total mortgage complaints. Meanwhile 41% of claims against intermediaries selling banking and/or mortgage products were upheld by the FOS. “The broker is liable in situations where to consumer can clearly demonstrate that advice has been inappropriately given and was flawed,” says Duffy. “The heart of the matter is actually proving this and given that there will always be a proportion of mortgage cases where supporting paperwork wasn’t what it should have been then you will see inconstant outcomes and claims success rates.” If the sale preceded M-day in 2004 Robert Sinclair says it is likely that FOS would apply MCOB guidance to pre 2004 claims.
A spokesman for the Ombudsman explains: “The Ombudsman is not a regulator or a consumer champion. Our role is to settle each dispute on its own merits – making a fair and balanced decision for both sides, based on the facts and circumstances of each individual case.
“If a consumer feels that they have been mis-sold a mortgage they may be able to bring a complaint to the Financial Ombudsman Service however they must first give the business the opportunity to resolve the complaint before the ombudsman can step in.”
preCedenT While it’s a different example altogether, the endowment mortgage debacle serves to illustrate how these situations have gone in the past. To recap, in 2003 the government estimated that about eight in 10 of the endowment policies then in force were unlikely to pay off the mortgages they were taken out for. A Treasury Select Committee report at the time suggested as much as 60% of endowment policies may have been mis-sold. In June 2005 FOS reported receiving 1,300 endowment mis-selling claims a week. Of cases examined around 40% were found in the claimant’s favour and they received compensation. Grounds to complain included if the product was unsuitable at the time it was
“Remember the watertight rule: if it is not written down it did not happen. This is much tougher for smaller outfits and sole brokers to deal with as there are fewer people to police the paper- work. It may sound like the administration Gestapo but it is worth it to avoid nasty issues in the future”
sold; the borrower did not understand what they were buying or the risks involved at the time they bought the policy; and if the sale was inappropriate given their financial and personal circumstances at the time.
For any claim to be successful, the Ombudsman had to determine that the borrower lost out as a result. But Gemma Harle, managing director of
TenetLime, says the consumer usually wins out. “It all comes back to record keeping- if it ends up being one party’s word against another then, on recent evidence, any claim is likely to be found in favour of the consumer.”
baTTening down The haTChes What can brokers do if they’re worried? “Have good record keeping and robust files that set out their rationale for their recommendations,” says Sinclair. Lipnicki hammers home the same point. “Remember the watertight rule: if it is not written down it did not happen. This is much tougher for smaller outfits and sole brokers to deal with as there are fewer people to police the paperwork. It may sound like the administration Gestapo but
36 mortgage introducer OCTOBER 2011
it is worth it to avoid nasty issues in the future.”
Kevin Duffy also points out that most
brokers will have the requisite information somewhere in their files.
“Most decent practitioners will have
provided a suitability letter both pre and post October 2004,” he says. “Even in cases they have not, there may be a notes section within the original fact find document which outlines and details the client’s personal circumstances, budgets and liabilities history. Quite often these fact finds will have been co-signed by an applicant confirming accuracy of disclosures.” And if they aren’t, there are other courses of action. “Brokers could undertake a contact
programme to re-create their files or confirm with the customer that they have no issues with what was undertaken previously,” explains Sinclair. “They should discuss any action with their professional indemnity insurer before commencing any activity.”
Harle says this is vital. “Brokers should identify high risk customers, conduct reviews with their clients and revisit any paperwork gaps and address these with the clients. It is extremely important to avoid claims as the more you have the more will be found in the favour of the consumer.” Duffy also suggests brokers go back and assess where they could be at risk of claims. “Ideally it is not too late to go back and revisit the original fact find and to attempt to perform a gap analysis in conjunction with the client,” he says. “At the very least brokers might want to check that the rate and product which the client is still on remains the most affordable and appropriate. Amazingly too many brokers even in this depressed market still make no effort to stay in touch with clients and to build ongoing good will. “If nothing else, that has the potential to
insure that clients respect their broker and would take their advice in good faith and not behave with vexation or act frivolously in conjunction with a claims management company.” JuMping on The
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