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Mortgage adviser pays more than $3,000 to end complaint

A mortgage adviser has paid more than $3000 to a woman after a delayed application for a mortgage led to costly engagement with another broker.

Tuesday, October 19th 2021, 10:49AM 10 Comments

by Eric Frykberg

The decision came after the matter was considered by the disputes resolution organisation, Financial Services Complaints Ltd  (FSCL).

The case concerned a woman named only as Judy, and none of the mortgage professionals involved in the case were named. 

Judy had recently been discharged from bankruptcy, and feared her loan application to buy a house might not be straightforward, so she contacted a mortgage adviser for help.

Judy said the adviser was confident he could arrange finance, so she signed a sale and purchase agreement.

Over subsequent weeks, there was no progress, and with a settlement date looming, Judy was forced to ask for a two week extension of time from the vendor.

Two and a half months after Judy first contacted the adviser, and with days to go before settlement, Judy asked another mortgage adviser for help.

This mortgage adviser said she would have to delay other work and asked Judy to pay a $2,000 urgent application fee. Judy agreed.

Within 48 hours, the second mortgage adviser had arranged finance and Judy was able to purchase the property.

However, Judy complained to the first mortgage adviser, accusing him of empty promises which caused her stress and additional costs. 

She then sought $2,000 as compensation for the urgency fee paid to the second broker and $2500 for her legal costs, along with unspecified dfamages for worry and stress. 

When the mortgage adviser did not respond, Judy contacted FSCL.

When internal mediation failed to resolve the matter, FSCL started an investigation.

On looking closer, FSCL accepted that much of the lawyer's fee would have been incurred anyway, without any complications, but it found she did incur extra legal costs of $260 and a further $150 for arranging a LIM report.

After further discussions, it was accepted that compensation of $1000 would be appropriate for stress and inconvenience.

FSCL then proposed a total compensation package of $3,310. The mortgage adviser then expressed some dissatisfaction and accused FSCL of taking Judy's side. 

After further discussion, with the possibility of formal arbitration by FSCL hanging over the case, the mortgage adviser said he did not want to take any more time over the complaint.

He then offered to pay $3,310 to resolve the complaint, which Judy accepted.

Tags: FSCL

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Comments from our readers

On 19 October 2021 at 11:58 am Jonny Good Guy said:
why did the so-called Judy go unconditional
that is her choose
On 19 October 2021 at 12:20 pm valkyrie6 said:
Who in their right mind would go unconditional on a sale and purchase agreement without confirming “unconditional “finance first, any adviser telling clients to go unconditional on a sale without confirming unconditional finance first deserves to be at a tribunal, any professional adviser knows that clients that can’t actually settle on an unconditional sale can forfeit their deposit and be charged penalty interest and worst-case scenario sued.
I’m also guessing Judy did not seek legal advice before going unconditional on a sale with out finance as any decent conveyancing solicitor would advise her not to do so until she had unconditional finance.
Advisers with a cavalier “she’ll be right” sure you can go unconditional on a sale without unconditional finance! attitude should disembark from the industry as this is not a game we are playing; people rely on us for professional advice and direction.
On 19 October 2021 at 12:58 pm Amused said:
@valkyrie6 - well said.

The 2nd broker also seems to think it’s ok to be charging a client a $2,000 "urgent application fee" (sigh) on top of the commission that they earnt from her mortgage approval. I guess if the client agrees upfront to this additional cost being incurred to secure finance its ok but still not a great look for our industry taking advantage of someone in a vulnerable position.

On 19 October 2021 at 4:39 pm Laurie said:
Thanks Amused. When I next get a stressed out potential new client looking for someone to drop tools and assist at no cost or potential return I will recommend they get in touch with you. Awesome.
On 20 October 2021 at 9:07 am Amused said:
@Laurie - any mortgage adviser who thinks that whacking a new client with a $2,000 “urgent application fee” is ok just because they are busy needs to have a good hard look at whether they should be in this industry. You either have the capacity to act for a client or you don’t. No one is forcing you to drop everything to act for someone who is needing their finance done urgently.

Charging a fee on top of the commission you will already earn from the lender been approached is just plain greedy. Also if all advisers did this then what do you think would happen to the commission levels that banks currently pay to mortgage brokers? The best thing that this industry has going for it currently is that we are a free service to clients with our time being reimbursed by the lenders themselves.

If you think that a fee for service model would actually work for mortgage brokers you’re just doing exactly what the banks would like to have happen to our industry. CBA in Australia have been very vocal about this. Future bank ad on TV reads “come see a FREE home loan specialist at one of our local branches for your home loan approval”. Am getting a bit tired of people in this industry who are unable or incapable of looking at the “big picture”.

P.S. The dispute resolution scheme IFSO is running an Online Workshop soon on 28th October titled “Giving a damn - an ethics conversation”. Key themes of the workshop are ethical expectations and discretionary judgement based on values. Let me know if you’d like the link?
On 20 October 2021 at 11:23 am FinancialDigitBasher said:
Amused is the armchair critic who gives his opinion but doesn't even know or understand an individual proposal. Mr Smug over here must've missed his calling at the parking enforcement agency.
On 20 October 2021 at 12:52 pm Amused said:
@ FinancialDigitBasher – every time you charge a client a fee on top of your brokerage earned you are giving the banks just the excuse they need to reduce our commissions – thanks! What don't you get?

On 20 October 2021 at 1:08 pm Laurie said:
@ Amused - taking advantage or being commercially minded...? I agree with FinancialDigitBasher, knowing and understanding are key. Skills all great mortgage advisers need but sadly, some lack.
On 20 October 2021 at 1:14 pm FinancialDigitBasher said:
@Amused who said the adviser got paid commission?
On 20 October 2021 at 1:25 pm Laurie said:
@ Amused - P.S. Bank bashing (e.g. as per comments about Westpac in another thread) is more likely to result in a commission haircut. Or in the termination of a lender accreditation. Again, for me, being commercially minded is really important to ensure future personal and industry success.

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AIA ▲4.60 3.65 4.35 4.69
ANZ 4.79 4.25 4.95 5.35
ANZ Blueprint to Build 2.03 - - -
ANZ Special - 3.65 4.35 4.75
ASB Back My Build ▲2.29 - - -
ASB Bank ▲4.60 3.65 4.35 4.69
Avanti Finance 4.55 - - -
Basecorp Finance 5.49 - - -
Bluestone 3.74 3.54 3.89 4.09
BNZ - Classic - 3.65 4.35 4.69
BNZ - Mortgage One 5.15 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Rapid Repay 4.95 - - -
BNZ - Std, FlyBuys 4.95 4.25 4.95 5.29
BNZ - TotalMoney 4.95 - - -
CFML Loans ▲5.35 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 3.59 4.09 -
Heartland Bank - Online 2.25 1.85 2.35 2.65
Heretaunga Building Society 5.25 4.00 4.60 -
HSBC Premier 4.49 2.19 2.45 2.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 4.15 3.29 3.85 4.19
Kainga Ora 4.43 2.88 3.28 3.59
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank ▲4.25 ▲4.54 ▲5.20 ▲5.54
Kiwibank - Offset ▲4.25 - - -
Kiwibank Special ▲4.25 ▲3.69 ▲4.35 ▲4.69
Liberty 4.84 - - -
Nelson Building Society 4.95 ▲4.29 ▲4.85 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.39 3.54 3.89 4.09
SBS Bank 4.79 3.65 4.19 4.25
SBS Bank Special - 3.15 3.69 3.75
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - ▲3.45 - -
The Co-operative Bank - Owner Occ ▲4.75 ▲3.65 ▲4.35 ▲4.69
The Co-operative Bank - Standard ▲4.75 ▲4.15 ▲4.85 ▲5.19
TSB Bank 5.34 4.09 4.74 4.99
TSB Special 4.54 3.29 3.94 4.19
Unity 5.65 4.15 4.60 -
Wairarapa Building Society 4.99 ▲3.65 ▲4.05 -
Lender Flt 1yr 2yr 3yr
Westpac 5.09 ▲4.29 4.95 5.29
Westpac - Offset 5.09 - - -
Westpac Special - ▲3.69 4.35 4.69
Median 4.77 3.65 4.35 4.69

Last updated: 3 December 2021 8:16am

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