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Mortgage adviser wins No-Loan-No-Fee dispute

A mortgage adviser who sent a bill for a loan that did not go ahead has won a disputed case for payment.

Tuesday, July 19th 2022, 2:32PM 2 Comments

by Eric Frykberg

This came after adjudication by the Financial Dispute Resolution Service (FDRS) found that the No-Loan-No-Fee rule did not apply.

The case concerned a man with an existing mortgage who sought a second loan from another lender to subdivide his property.

He signed a Service Agreement which noted that typically there was no cost to the customer because payment to a broker came in commission from a bank or non-bank lender.

But the deal fell over after the lender sought insurance certification which the borrower declined to give.

His reasoning was that he did not want the bank with his existing mortgage to know that he was seeking a second loan.

The offer of that second loan was then withdrawn.

The mortgage adviser then sent the customer an invoice seeking $750 plus GST, which the customer declined to pay.

The broker then began to pursue the debt, leading the customer to contact the FDRS, complaining that he was being bullied into paying a fee that he didn’t owe.

Further, he wanted reimbursement for costs incurred to procure a valuation of his property for loan purposes.

The FDRS went straight to adjudication and found in favour of the mortgage adviser and directed the customer to pay the bill.

The adjudicator found the mortgage provider had delivered the services requested, and there was insufficient evidence that the customer was misled or had received poor advice.

He added the customer’s existing mortgage compliance and insurance requirements were subject to his pre-existing agreements and the onus was on him to meet those obligations.

The adjudicator added the Service Agreement could have been drafted better, but it clearly listed set fees to be incurred when the No-Loan-No-Fee rule did not apply.

Tags: Financial Disputes Resolution

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Comments from our readers

On 20 July 2022 at 4:08 pm JeffQV said:
This is only one part of the story. The other is that this process cost the Adviser over $3500 in DRS fees plus countless hours of time so a total loss financially. A financial dispute with good documentation should never go through this process.
On 27 July 2022 at 11:39 pm Murray Weatherston said:
This case seems odd to me.
It seems like the DRS has turned normal DRS on its head. Normal FSAP DRS has the adviser/broker as the member of the scheme. The complainant is the public. The DRS decides the complainants case and orders the adviser to pay or not. The adviser is bound to follow the decision, the customer is not so bound.
In this case the facts as presented effectively make the broker the complainant in a de facto debt collection situation.
How come the client who is presumably not a member of the scheme can be ordered to pay? Did they agree in advance to be bound by the decision of the DRS, effectively making the DRS an arbitrator?

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Lender Flt 1yr 2yr 3yr
AIA 6.35 5.25 5.45 5.99
ANZ 6.34 5.59 6.05 6.29
ANZ Blueprint to Build - - - -
ANZ Special - 4.99 5.45 5.69
ASB Bank 6.35 5.25 5.45 ▼5.69
Avanti Finance 6.65 - - -
Basecorp Finance 7.25 - - -
Bluestone 6.89 - - -
BNZ - Classic - ▼4.95 5.39 ▼5.69
BNZ - Mortgage One 6.39 - - -
BNZ - Rapid Repay 6.39 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 6.39 ▼5.55 5.99 ▼6.29
BNZ - TotalMoney 6.39 - - -
CFML Loans 7.25 - - -
China Construction Bank - 5.35 5.80 5.99
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼4.89 - -
Co-operative Bank - Owner Occ 6.25 ▼4.99 5.39 5.89
Co-operative Bank - Standard 6.25 ▼5.49 5.89 6.39
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 5.35 5.85 -
Heartland Bank - Online 4.60 4.90 5.29 5.39
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 6.50 5.60 6.00 -
HSBC Premier 6.34 5.09 5.34 5.59
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 6.00 ▼4.79 5.15 ▼5.69
Kainga Ora 5.85 5.31 5.58 5.97
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 6.00 5.95 6.45 6.79
Kiwibank - Offset 6.00 - - -
Kiwibank Special - 4.95 5.45 5.89
Liberty 4.84 - - -
Lender Flt 1yr 2yr 3yr
Nelson Building Society ▲6.95 5.55 6.15 -
Pepper Money 5.29 - - -
Resimac 5.59 6.54 6.44 6.98
SBS Bank 6.29 ▼5.39 ▼5.79 5.99
SBS Bank Special - ▼4.89 ▼5.29 5.49
Select Home Loans 6.89 - - -
TSB Bank 7.05 ▼5.65 6.09 ▼6.39
TSB Special 6.25 ▼4.85 5.29 ▼5.59
Unity 5.65 4.95 5.55 -
Wairarapa Building Society 6.49 5.55 6.15 -
Westforce credit union - Special - 5.35 5.85 -
Lender Flt 1yr 2yr 3yr
Westforce credit union - Standard 5.85 6.05 6.55 -
Westpac 6.39 ▼5.55 6.05 ▼6.29
Westpac - Offset 6.39 - - -
Westpac Special - ▼4.95 5.45 ▼5.69
Median 6.34 5.33 5.79 5.93

Last updated: 10 August 2022 9:06am

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