Insights for consumers and participants
Sometimes, reaching an early resolution to a complaint means that the parties may need to agree to something that they can live with, rather than getting their ideal outcome. Compromise, or agreeing to disagree, can save both the participant and the consumer time, stress and money.
What happened?
In August 2022, Amelia asked a mortgage adviser for help to refinance the existing mortgage that she and her ex-partner had with the bank, so she could buy her ex-partner’s share in their family home and put the mortgage in her sole name. Amelia’s new loan was settled in April 2023, and part of the loan was fixed for one year and the other part was fixed for two years.
In April 2024, the adviser helped Amelia refix the rate that had been set for one year the year prior. Amelia mentioned refinancing in April 2024, but the adviser had advised against it as Amelia’s loan had a three-year retention period because of a cash incentive she had received in April 2023.
In September 2024, Amelia refinanced her loan with a different bank with the help of a colleague. Because Amelia had refinanced earlier than the three years, the original bank asked her to repay her cashback of $5,600 and a break fee of $1,400. The adviser then invoiced Amelia for the $1,500 commission that the original bank had clawed back from him.
Amelia was unhappy with the adviser’s advice and fee, so she complained to FSCL.
What were the parties’ views?
Amelia complained that the adviser had:
- Not disclosed to her that she might have to pay him if she refinanced early; she only found out about the fee after she received the adviser’s invoice. Amelia said it was unfair to make her pay when the fee was not disclosed.
- Not advised her that she might have to repay the full $5,600 to the bank if she refinanced within her three-year retention period. The adviser had told her if she refinanced after twelve months but within three years, she would only have to pay back a percentage proportional to the amount of time remaining. Amelia said that because the adviser’s advice had been wrong, the adviser should reimburse her $5,600.
- Threatened a debt collector if Amelia did not pay the adviser’s invoice on time.
The adviser said that:
- He had disclosed all his fees to Amelia in emails in August 2022, had discussed those fees with her by phone, and Amelia had signed a declaration confirming that she had read and understood the fees.
- Amelia had used a colleague to help refinance in September 2024. He did not give her advice about refinancing, so he should not be responsible for the money she had to repay to the bank.
What was FSCL’s view?
After investigating the complaint, we could see that:
- The adviser had adequately disclosed his fees to Amelia. He had sent information to Amelia explaining the fees via email and had signed a declaration confirming that she understood the fees. The adviser also provided a file note of his call with Amelia in August 2022, which confirmed that he had discussed the fees with her.
- Text messages between the adviser and Amelia after Amelia had refinanced showed that Amelia was confused about why the bank was asking her to repay the full cashback. However, because the adviser did not advise Amelia on the refinancing, Amelia’s colleague did, we did not think it would be fair to hold the adviser responsible.
We could also see that the adviser had not advised Amelia of FSCL’s services when she first raised her complaint, which the adviser was required to do, and the adviser’s record keeping (particularly in recording call notes) on the complaint was inadequate.
How did FSCL suggest that the complaint should be resolved?
We initially suggested that, to reach an early resolution, Amelia and the adviser agree to Amelia paying half of the adviser’s invoice, as Amelia had still had the benefit of the adviser’s services. Amelia did not agree to paying half.
We then explained our view to Amelia and suggested that she discontinue her complaint against the adviser. Amelia did not agree.
Before we were able to make a more formal recommendation on Amelia’s complaint, the adviser offered to waive the full clawback fee in order to reach an early resolution. Amelia agreed to the adviser’s new offer.
Before closing our file, we reminded the adviser that he is required, both under our terms of reference and under the Financial Market Conduct Regulations, to tell consumers about FSCL as soon as the consumer raises a complaint or expresses dissatisfaction. The adviser said that he would make sure he did this moving forward.
