In its annual review of complaint data, the Financial Ombudsman Service (FOS) gave examples of complaints it upheld in favor of the consumer. Mortgage Solutions highlights the ones brokers should know the most about.
Secured loan distress
Complaints about secured loans increased 2% year-on-year, from 1,130 to 1,147. Here, FOS describes a case where a lack of in-depth affordability checks left a person with severe mental illness. in over-indebtedness.
Ms. T told us that her brother, Mr. T, had been taken into care with severe mental illness. She had discovered that he had accumulated serious arrears on a secured loan of Â£ 40,000.
Ms T explained that she saw her brother’s application form and believed there were serious mistakes. She had complained to her bank that they shouldn’t have lent her the money. But the bank had told her it had no reason to doubt the information Mr. T provided – and had stepped up its request because of the low loan-to-value ratio.
We found that the bank missed a number of opportunities to ensure it was doing the right thing by MT
He had told them he had a ‘guaranteed’ income of Â£ 12,000 a year from a pension, but the bank had not asked for evidence. Mr T also said he did not pay council tax, which the bank had not questioned. The driver’s license he had shown had expired and was only valid for 12 months initially.
In our opinion, all of these things should have alerted the bank that they needed more information. And if they had asked for even a part of it, we thought they would have realized that the loan might be unaffordable for MT
The bank agreed accelerating its application had not been the right option and said it would write off outstanding debt.
Age assessments and mortgages
Mortgage complaints fell 8% year-on-year to 10,428, FOS reported. The ombudsman said he has seen improvements in the way lenders treat older borrowers, but more needs to be done.
Simon Pugh, Director of the Ombudsman, explained: âAge can be an important factor in the design and pricing of financial products and services – and age discrimination is not necessarily illegal in this industry. . But if a business takes a customer’s age into account when assessing risk, it should make sure that it only uses relevant information to assess risk.
âThis year we have continued to see complaints where – apparently because of their age – people have had difficulty with their mortgages. But we have seen a growing willingness on the part of lenders to work flexibly around age limits. I hope this is in part the result of the ongoing conversations we have had with lenders, highlighting situations where strict lending policies could lead to unfair results for some clients.
âThere is still work to be done. And I would say, overall, this is the communication where lenders sometimes break down. This year we have continued to hear from people who just don’t understand why a lender turned down their mortgage application.
âOf course, lenders may not want to share commercially sensitive information. But our experience suggests that the more open the conversations that take place at the beginning, the less likely the complaints will escalate. “
Payday loan frustration
Customers frustrated with the way they have been treated by payday loan companies have turned to the ombudsman for help by the thousands. The 2016/2017 annual report showed that 10,529 new complaints had been received by the ombudsperson regarding payday loans, compared to 3,216 the previous year.
Richard Thompson, Senior Ombudsman and Chief Quality Officer, gave an example of behavior that she says does not put the customer at the heart of her decision to lend money.
He said: âMs. L called us, saying she didn’t know where to start to sort things out. She had originally borrowed Â£ 300 from a payday lender but was now in debt thousands of pounds. We could see from Ms L’s bank statements that during the term of her Â£ 300 loan she had taken out four more loans from other payday lenders and was still in overdraft.
âOn the same day she repaid the Â£ 300 loan, she had borrowed an additional Â£ 500 from the original lender. The payday lender told us they had done an affordability assessment. But there was no record that they took details of Ms. L’s expenses at the time.
âWe thought the lender should have done more, especially since Ms. L was asking to borrow about a third of her monthly income. Had they carried out more in-depth checks, it would have been clear that she relied heavily on payday loans to get by.
âWe decided that the payday lender should not have given Ms. L the second loan. So we told them to pay back all the interest and fees they put on it, adding the interest – and find a fair and affordable way for Ms. L to pay back what she owed.
âWe also asked the lender to ensure that there was no adverse information in Ms. L’s credit report regarding the loan he should not have given her. We helped Ms. L get in touch with a free charity to help her take control of her larger debt.
Read the full FOS report.
Samantha Partington is a freelance commerce and consumer journalist who writes on real estate and personal finance. Previously, she worked for the Daily Mail and Property Week. She is the former associate editor of Mortgage Solutions and editor of Specialist Lending Solutions. Prior to becoming a journalist, Samantha worked as a mortgage broker and most recently for a mortgage, bridge and secured loan lender. Samantha is CeMAP qualified. Follow her on Twitter @ SamJPartington1.