by Paul McBeth
The Advertising Standards Complaints Board has upheld a complaint that a radio ad by solicitor John Levenbach about his services arranging mortgages was misleading.
In the ad, broadcast on Fifeshire FM, he stated "... If you need to borrow money from the bank, we can frequently arrange your mortgage for about half the cost you'd pay if you went through a broker. Brokers get paid by banks from the application fee YOU pay. We have told banks we will NOT take this commission, and give you a credit for the application fee..."
However, Sam Nichol of Mike Pero Mortgages (owner of the franchise in the Nelson region) brought a complaint relating to this ad, saying it contained an incorrect statement and pointing out that "there's no cost to go through us!"
In a decision just released, the Board said it was clear in respect of the statement "we can frequently arrange your mortgage for about half the cost you'd pay if you went through a broker" that, as there was no cost to go through Mike Pero Mortgages, brokers didn't always get commission nor were they always paid by the banks. The Board therefore found the advertisement confusing and misleading, and therefore in breach of the Code for Financial Advertising.
John Levenbach told the Board that he had recorded the ad about three years ago, before Mike Pero Mortgages began operating in the Nelson region or any region where Fifeshire FM had been broadcasting. He argued that Mike Pero Mortgages' advice to the board that its bank commissions were separate from any application fee distorted the facts.
He told the Board: "I understand that in almost all cases, if banks must pay a commission to a broker, they will not agree to reduce the application fee payable by the borrower to anywhere the extent that we can negotiate such a reduction, when banks must pay us nothing for the referral."
"I believe that banks do seek to recover the costs which they must pay brokers such as Mike Pero Mortgages from the borrowers, either from the application fee payable by the client or in other ways.
"Compare this to the case where banks must pay no commission or any sum at all to the writer, and therefore are able to offer a 'sharper deal' to the mortgage applicant, ie at less cost to persons referred by the writer."