Insights for participants and consumers
Participants must ensure that all potential fees, including clawback fees, are disclosed to consumers in a clear, concise, and easy to understand way. It is best practice for participants to keep written file notes of any discussions that they have had with a consumer about fees, or about the advice that has been given.
Consumers should ensure that they read the disclosure information their adviser gives them, as fees will be disclosed in that information.
What happened?
Eloise and her husband Ethan complained about the service they received from their mortgage adviser between June and September 2024 when they were looking to purchase their first home. They found a property they liked in Auckland, signed a sale and purchase agreement, but then had difficulty with their lending because the property had unconsented work. Eloise and Ethan withdrew from the purchase and withdrew their lending application. Their adviser sent them an invoice for their fee – $2,500.
Eloise and Ethan complained to FSCL.
What were the parties’ views?
Eloise and Ethan complained that the adviser:
- Withheld important information, including the types of lenders available, which bank the adviser had applied to for lending, the pros and cons of each lender, and had not provided a copy of the pre-approval letter when their application was successful.
- Had not advised them to avoid houses with unconsented work, otherwise the bank might not accept their lending application.
- Advised them to contact insurance providers about insurance cover for the unconsented work, which wasted their time and was not a viable solution.
- Charged a $2,500 fee, even though the adviser had verbally assured them that the service was free.
The adviser explained that:
- They had told Eloise and Ethan over text message about the different lenders available and which lender the adviser had applied to. The adviser said that it was their usual practice to withhold pre-approval letters to ensure that those letters were not passed on to competitors.
- It was outside of the scope of the adviser’s expertise to give advice about unconsented work.
- They had properly disclosed the fee for service to Ethan and Eloise, in writing, and Ethan and Eloise had signed a declaration confirming that they understood.
How was the complaint resolved?
During our investigation, Eloise, Ethan, and the adviser agreed to settle the complaint between themselves, with the adviser agreeing to waive the fee.
If had investigated the complaint, we would have checked that the fee was clearly disclosed and explained to Eloise and Ethan, and that the fee fairly reflected the adviser’s time and expertise spent on advising Eloise and Ethan.
As Eloise and Ethan’s complaint had been resolved by agreement, we closed the file.
