Mortgage broker loses misselling case!

Rednoseranter

Interesting thread - do you consider fraudulent complaints to be where the customer didn't actually have a complaint before they printed off one of the many pre-prepaired letters available? Do you think its the financial firms or the FSA/FOS that seriously underestimates the general intelligence of the public when it comes to financial matters?

dunstonh

do you consider fraudulent complaints to be where the customer didn't actually have a complaint before they printed off one of the many pre-prepaired letters available?

Sort of but thats too simplistic as some people may only become aware that theirs was wrong because they read about it.

I put it down to consumer greed in some cases. Just look a the PPI reclaims forum and you will see that there are some genuine mis-sales in there but also a number trying it on in the hope of getting some free money.

We have even seen on these forums where people are asking if they can claim for mis-sales even when they have claimed on the policy successfully.

I also put it down to a significant number of dodgy claims companies telling people to complain even when there is virtually no chance of the complaint being upheld. The FOS have recently come and and said they recognise this as a problem and it is being looked at (contracting out of SERPS is a good example. The FSA review found a failure rate of around 1.5% of cases and they published exactly where the problem was in a flow chart. Claims comapnies make no referece to 1.5% chance of success and no mention of the flow chart. They have even put in complaints against occupatioanal scheme contracting out where you have no chance of success at all but taken £500 from the consumer for the pleasure of a 1 minute word template).

Some of these template letters are actually more damaging than good. There was some report last year that template letters generally have a lower success rate than personalised letters. It didnt say why but its possible that complaints handlers are firms and the FOS know that the odds are that a template letter is a possible try it on and that many of the things in the template letters are easily rejected and if you have been found to be proven wrong in one area, when another area is not quite so clear but with evidence but a balance of probability decision needs to be made then they can see that as you have been wrong elsewhere, you are probably wrong here as well. I know a couple of people that deal with complaints and they say that they can tell a lot of the time which complaints are genuine and which are try it on. They also know which complaints companies are good and which are bad.

You have a complaints industry that makes money by putting complaints in. If there is nothing to complain about you get the situation where people are told to pay £500 up front to put a template letter complaint in with the view of getting redress on a 1.5% chance of success. The money to the claims firm is not the 1.5% chance but the £500 up front. Cold call 50 people a day. Get 5 to sign up and you earn £2500 a day and all its taken you is a phone call of lies and a template letter that takes 1 minute to churn out.

HelpWhereIcan

macaque wrote: »

If you've done nothing wrong, you have nothing to fear.

Quite.

Which is why I am still in the industry at the mo.

but...

dunstonh wrote: »

Biggest concern of many is fraudulent complaints. They are increasing significantly.

and as dunstonh has put so well in his later post, there is a whole industry out there that makes its money whether the claims they encourage consumers to make are successful or not.

There is also the concern that many complaints are judged retrospectively using the regulatory regime/media consensus at the time of complaint rather than the one in force at the time the advice was given.

e.g. Which! used to publish best buy tables for endowments and did very little to promote repayment mortgages but their website has been one of the main sources of template letters for endowment complaints.

Most succesful endowment claims have been on the basis of poor record keeping on the part of the adviser rather than any proof.

Who is to say that even if I document a case correctly by today's standards that a regulatory change wouldn't mean that my case file was incomplete?

The fact that the FOS decides based on probability rather than the weight of evidence in the same way that a court does means that people are positively encouraged to take their compliant to the FOS whether or not there is any reasonable evidence of wrongdoing. While that protects the naive it also gives the dishonest opportunist a positive advantage over the adviser - especially if they are willing to lie.

This is made worse by the fact that the adviser has to cover any costs of the FOS but even the fraudulent or vexatious claimant has nothing to pay ... ever.

The FOS admits that they have seen cases that are clear cut instances of dishonesty, contradiction and fabrication of evidence on the part of the claimant but, while an adviser doing the same would face sanction, the most the FOS can do is find in favour of the adviser.

Even the best advisers will remain a little paranoid until the complaints process is structured to weed out and deter the frivolous, dishonest or vexatious complaint a bit more.

Rednoseranter

I think we are in a whole different place from 15 or even 10 years ago in respect of the industries ability to defend complaints - I agree that the whole reason the endowment misselling issue has been so large and widespread is that the firms were awful at retaining complete and accurate records of the advice provided at the time.

However there weren't the regulatory standards regards recordkeeping that we have today and I don't think that we'll see another similar issue like the endowment problem. PPI is different as these were products sold by anyone, often without any controls. I think provided that mortgage firms have followed MCOB and the Mortgage Code before this I don't see that there will be too much to worry about.

rizzla

HelpWhereIcan wrote: »

Yes ... and so is the FSA

http://www.fsa.gov.uk/smallfirms/resources/faqs/dual_pricing.shtml


I don't make the rules but, as I said, it is wrong to claim that a mis-selling claim could be brought simply because there may have been a cheaper deal available elsewhere. To try and give people the impression that it could is to mis-represent the situation.

what about brokers who offer their client a deal that is more beneficial to them than another deal from the same lender, that the client is eligible for. I'm talking specifically about brokers who use the lender's package search software/online tool that requires them to enter all the client's details (income, current debts, years at residence etc to build a client profile) and returns in real-time a list of packages that the lender is willing to offer that specific client. i think it's fair to say in many cases the client doesnt know what his broker's computer screen is returning. I know (i do now anyway) that his search can return say 20 packages that his client will be eligible for, each with different rates, fees, terms etc but also with difference comission to the broker. the broker can choose to shield whatever he wishes and present to his client, whatever package he wishes. this could mean client getting a less attractive deal but not knowing any better.

i came to know about this through my own broker, who i had purchased my first mortgage with. i was back for my second mortgage (buy to let) around the time the rates hit rock bottom and house prices were attractive to me. we went through the same exercise of me sitting at his desk while he filled out his questionnaire for BM or GMAC or what have you until 10min later when he announced the best package available to me was something ridiculous like base rate + 6% variable with 70% LTV. this was when base rates were at 0.5% and at the time, 80% or even 85% LTV were still available in the sub-prime market. Asked him to try with a different lender and another 15min later same story, his 'best' offer was again something sounding similarly ridiculous. He dismissed all the other results as "not suitable" or "not applicable to me". I found it odd and asked him to show me what he was looking at. He did (although didnt seem happy about it) I scanned his screen for 3min and found at least half a dozen packages that looked better than his "best one". I picked out 3 packages that were much more attractive to me and asked his thoughts. Needless to say his response was along the lines "oh, you are right, didnt' spot that". We're talking something like 4% + base rate 80% LTV.

I walked away after that but was left wondering whether he also "didnt spot" better packages when i took out my first mortgage (fixed at 7% for 2 years, just a month before rates started tumbling down).

From what I understand, brokers need to be open about what their client is eligible for and in my case, should have put the other packages out on the table too - is this correct?

dunstonh

what about brokers who offer their client a deal that is more beneficial to them than another deal from the same lender, that the client is eligible for

Always a risk when you dont go independent. However, the pricing of deals is not product specific. i.e. the lender doesnt pay a different amount depending on the deal chosen. At least not in the prime market.

From what I understand, brokers need to be open about what their client is eligible for and in my case, should have put the other packages out on the table too - is this correct?

The recommendation has to be justified. If the broker is recommending a sub prime mortgage when a prime mortgage (or near prime) was possible then this would be classed as a mis-sale. If you are talking about different deals, within the same criteria, then its less likely to be as the cost of most of the deals (ignoring rate changes) is often very similar over the period. Its just distributing the money in a different way.