Despite brokers investing to ensure their procedures are compliant, many fear rogue customers. Less scrupulous clients are discovering the complaints system is skewed in their favour and are looking to cash in. While clients can complain free of charge, if a gripe ends up at the Financial Ombudsman Service mounting a defence will cost brokers hundreds of pounds, even if the complaint is baseless. And the cost adds up to more than the levy to the FOS. There’s also management time to consider, plus the danger that professional indemnity insurance will rocket.In a scenario worthy of a Mafia movie it is suggested some brokers may be tempted to pay off clients rather than pay out more defending themselves. Bill Warren of Complete Mortgage & Loan Services warns brokers against setting the bar too low in trying to reach a settlement. “Clients talk,” he says. “If you get a reputation for paying out too quickly they may take advantage.” What’s going on? The FSA is trying to reassure the industry that the Ombudsman has a mechanism for weeding out frivolous complaints. A spokeswoman for the Ombudsman says it does not see a compensation culture emerging and that FOS is not a “consumer champion, automatically taking the side of clients.” But it’s hard to feel reassured. If broker’s compliance systems are rigorous, this should protect them. And those who are worried should remember the importance of logging all conversations and recommendations. If the FSA and the FOS want to avoid undercover battles there should be a shot across the clients’ bows to warn off those looking to make a fast buck.
There are worrying signs that consumers are getting the better of the Financial Services Authority and mortgage brokers. When we addressed the issue of regulatory costs for our cover feature, starting on page 38, we found one of the main cost concerns is the threat of complaints - justified or otherwise - from consumers.