The Financial Ombudsman Service [FOS] annual report for the 12 month period ending 31 March 2014, is not for the faint hearted; it is 179 pages long and rammed full of detailed analysis and statistics. A review of the report allows readers to compare complaints in different business areas analysed by where complainants live, by their Socio-economic background, their occupation, their age, their disability status, their ethnic background, etc. Whilst this level of detail may be interesting to academics, it does not highlight emerging trends or suggest areas where businesses need to focus their attention, but the wider report does highlight such issues.
Lenders have failed to understand the FCA’s focus on “Treating Customers Fairly”
One of the many areas where the FOS saw an increase in the volume of complaints was mortgages. Another increase in this area was, however, particularly disappointing as there had been a 25% increase in the number of mortgage complaints the year before. What is more disappointing is the FOS comment, “we continue to receive so many complaints about straightforward administrative issues – as well as complaints where the lender hasn’t identified what the problem really is, or hasn’t taken the time to understand the impact the situation has had on their customer.” These critical comments from FOS seem to suggest that such lenders have failed to understand the Financial Conduct Authorities focus on”Treating Customers Fairly” [TCF]. Clearly, lenders and holders of mortgage assets have to do better.
Buy to let mortgages, lenders are under FOS jurisdiction
There were a growing number of complaints relating to ‘interest only’ mortgages including a higher number of complaints where consumers were concerned that they’d been given inappropriate advice when they originally took out their interest only mortgage. Also FOS reported a “significant number” of complaints relating to changed interest rates. These complaints were where changed interest rates affected both residential and buy to let mortgages. Complaints in relation to buy to let mortgages raises some “jurisdiction” issues for FOS and regulators. There is a wide confusion relating to the regulation of buy to let mortgages and the jurisdiction of FOS. Apart from in some narrow circumstances, buy to let loans/products are not regulated by the Financial Conduct Authority [FCA]. However, those who sell and manage buy to let loans are regulated firms or people and they have to comply with all the FCA rules including the TCF Rules. So although FOS may not be able to look at complaints relating to the sale of a buy to let mortgage by an intermediary they can, and do, look at complaints about buy to let loans when the complaint involves a lender.
Google “West Bromwich rate increase”
So the spotlight is again likely to shine on lenders who alter the terms of mortgage to charge a higher rate interest margin than the margin which was originally agreed, usually over a tracker rate. One simple Google search using the term “west bromwich rate increase” shows the strength of feeling against lenders who adopt such practices.
In the same vein, FOS saw a “small but worrying” increase in complaints where a lender “called in“the loan or vary terms of the loan. This is especially worrying as FOS suggest that in some cases “the decisions hadn’t been made legitimately – and they had serious consequences for the lives and livelihoods of their customers.”
Taking the place of the PPI scandal? – Not quite ‘the last chance saloon’
So if the mortgage industry is intent on not becoming the replacement for the PPI scandal they have to take the words in the FOS annual report on the chin, consider them a ‘wake up’ call and set about building on any TCF strategies they may have started to implement. Not quite ‘the last chance saloon’, but its only round the corner.