May 28th, 2013
On the release of its annual review, the Financial Ombudsman Service has accused lenders of not appropriately handling complaints in-house, leading to an escalated process that involves the arbitrator’s involvement. The results of the review state that from the end of the first quarter of 2012, to March 2013, they received 11,920 complaints on mortgage related cases. The level of complaints reveals a sharp increase from the previous year’s figures, which stated a total of 9,537 cases.
With relation to the spread of claims, the FOS disclosed that 69 per cent of these were directly linked to a lender, 15 per cent related to brokers, 8 per cent towards building societies, 2 per cent to IFA’s and 6 per cent to groups that included non-bank lenders. Of these claims, the FOS upheld a total of 51 per cent of the complaints towards the banks, 42 per cent against IFA’s, 38 per cent against brokers, 25 per cent to life insurance companies and 17 per cent against building societies.
According to the FOS the cause for the widespread increase in complaints is that lenders administrative processes are inconsistent, causing time-consuming errors during an application. The FOS noted that the lines of communication between a lender and the customer were poor in the majority of cases, and that the customer often complained on the basis that the lender did not appear to be listening to grievances.
The FOS describes its activities for the year within the review: “We were often able to help resolve these complaints informally – by bringing to light the full facts of the consumer’s situation and suggesting a range of options that the lender might be able to offer. We resolved many mortgage-related complaints this way. But it remains disappointing to see cases escalated to us where the complaint could have been prevented if the lender had engaged more constructively with their customer in the first place.”
Perhaps more of a concern for lenders will be the belief of the FOS that banking staff had struggled to fully comprehend the intricacies of the lenders products. The review stated: “From what we have seen, we could only conclude that the staff at many lenders were themselves unable to explain clearly how their mortgage products worked – or to answer more difficult questions from their customers.”
In addition to these issues, the FOS received complaints whereby a customer had complained that they were unable to pay their mortgage loan, but the lender was not satisfactorily dealing with their issue in an appropriate manor. In relation to interest only loans, the FOS noted: “A lot of people are saying they are keen to move, but are no-longer eligible after they took the temporary decision to step back to interest-only. But now, after a few years they can\'t move back to a capital and repayment loan, so feel excluded from the market.\"
The FOS disclosed that on average it receives 10 complaints a month in relation to interest only mortgages. Contrary to a wide-spread fear within the industry that mis-selling claims cause the largest amount of complaints, the arbitrator revealed that the majority in this area relate to administrative problems within the lenders own processes. However, with recent forays from PPI claims handlers moving into dealing with mortgage claims cases, these figures may change over the coming year.
Article by: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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