Confusion reigns

Saloni was buying her first home and asked a mortgage broker for help. Saloni wanted some flexibility with the structure of her loan and assumed the mortgage broker would gather information about her needs, research different lending options with different lenders and come back to her with a recommendation about the best way forward.

Initially Saloni said that she wanted to structure the loan with 80% on a fixed interest rate, and 20% on a floating interest rate so she could make lump sum repayments as her income allowed. Later Saloni instructed her mortgage broker to negotiate a fixed interest rate loan agreement for five years, with fortnightly payments of $750 and the ability to make lump sum loan repayments of up to 10% without penalty.

The mortgage broker failed to follow Saloni’s instructions and Saloni found herself, on settlement day, with a loan agreement that allowed for fortnightly payments of $650 and the ability to pay only 5% of the loan balance without penalty. Saloni was also disappointed that she did not get a more comprehensive level of service. The mortgage broker only contacted two banks for comparison, and Saloni felt she could have done that herself.

When Saloni complained to the mortgage broker, the mortgage broker undertook to fix the problem, but nine months later had done nothing at all. At this point Saloni complained to FSCL.



The mortgage broker immediately accepted responsibility for setting the loan payments at the wrong amount and for failing to make provision for repayments of up to 10% of the loan balance in any one year. The mortgage broker calculated that Saloni had incurred a direct loss of about $85 as a result of the wrong repayment amount and offered to compensate her for the $85 as well as $1,000 as compensation for the inconvenience caused.

However, the mortgage broker did not agree that his service was lacking. The mortgage broker said that the group he works within actively discourages contacting too many lenders, saying this can affect a person’s credit history. Unfortunately the mortgage broker had not kept any diary notes of his discussions with Saloni, making this a very difficult case to investigate and determine exactly what had been discussed between Saloni and the mortgage broker.

Saloni did not accept the settlement offered, saying that she would like to have the loan structured on an 80%/20% basis as she originally intended.



We initially advised Saloni that the $1,085 looked to be a reasonable response to the complaint. It was difficult to see that Saloni had suffered any loss as a result of the mortgage broker failing to secure a 10% early repayment facility. Saloni had not, as yet, had any ability to make a lump sum payment on the loan. There was also a clear record of Saloni withdrawing her instruction to structure the loan on an 80%/20% basis.

However, after Saloni provided further submissions, we agreed the mortgage broker should:

  • reimburse the $85 associated with the incorrect repayment amount
  • pay $1,925.15 as compensation for the direct loss (early repayment fee) associated with restructuring the loan on an 80%/20% basis
  • pay $500 as compensation for inconvenience.

The compensation for inconvenience was intended to reflect the mortgage broker’s failure to respond quickly to Saloni’s complaint and keep careful diary notes. While the mortgage broker’s service could have been better, Saloni appeared to have an inflated impression of the job she had asked the mortgage broker to do.



Saloni did not accept our recommendation. She said she felt we had preferred the mortgage broker’s evidence over her own recollection. Saloni said she would pursue the complaint through the Disputes Tribunal.


Insights for participants

This complaint is a timely warning to financial service providers that they must keep careful records of all their dealings with clients. The failure to keep adequate records will soon be a breach of a financial service provider’s legal obligations.