Next steps with mortgage broker compensation claim.
Discussion
Sorry, this is a bit of a long one.
Our mortgage broker made an error which resulted in us losing a mortgage deal (I’ve posted about it previously here: https://www.pistonheads.com/gassing/topic.asp?h=0&... They have admitted the mistake, and we’ve been going back and forth over their compensation offer. Because rates increased sharply at the time, our financial loss is around £3,000. So far, they have offered approximately £1,800 and, after correcting a miscalculation, £2,000. Both figures include a £200 payment for distress and inconvenience, which they chose to add without us requesting it.
Their position is that they will only compensate us for the increase in monthly payments. I’ve explained that the higher interest rate adds more interest to the balance each month than the extra we pay, meaning the remaining balance at the end of the product term will be higher as a direct result of their error.
Their explanation is:
“Firstly, while I appreciate your concerns around the inclusion of capital erosion or our lack thereof, I must explain that when calculating the total cost of a mortgage, we do so based on the rules set out by our regulator, the Financial Conduct Authority (FCA). They calculate the total cost of a mortgage product based on the aggregated monthly payments under each contract over the relevant period and also including any relevant fees.
As we have used the recognised formula to calculate the total cost difference between the two products as set out by our regulator, and in line with the way in which our advice is provided when considering the total cost of products, we are unable to reconsider the amount involved based on the calculation you have suggested.”
In other words, they are saying the FCA requires them to compensate only the difference in monthly payments, even though our actual loss is significantly higher.
I rejected their £2,000 offer because I want to be put back into the position I would have been in had they not made the error, not left roughly £1,000 worse off.
After rejecting the offer, they went quiet. Three weeks later I chased them, and they then forwarded an email (just the body, not the header showing when it was sent) which neither my wife nor I ever received. It simply repeated that they are sticking to the £2,000 offer because “The calculations provided are correct as per the expectations of our regulator, the Financial Conduct Authority and as such we are unable to change them.”
My options now seem to be: escalate to the Financial Ombudsman Service, use Money Claim Online, or instruct solicitors.
I’ve read that you can go to the FOS first and still pursue court action afterwards if you’re not satisfied, but that doing so can weaken a later court case, so some people suggest going straight to court instead.
I’d appreciate any thoughts or guidance on what to do next. Does the FCA genuinely expect compensation to be based on a calculation that ignores part of the loss, or are the broker trying their luck?
Our mortgage broker made an error which resulted in us losing a mortgage deal (I’ve posted about it previously here: https://www.pistonheads.com/gassing/topic.asp?h=0&... They have admitted the mistake, and we’ve been going back and forth over their compensation offer. Because rates increased sharply at the time, our financial loss is around £3,000. So far, they have offered approximately £1,800 and, after correcting a miscalculation, £2,000. Both figures include a £200 payment for distress and inconvenience, which they chose to add without us requesting it.
Their position is that they will only compensate us for the increase in monthly payments. I’ve explained that the higher interest rate adds more interest to the balance each month than the extra we pay, meaning the remaining balance at the end of the product term will be higher as a direct result of their error.
Their explanation is:
“Firstly, while I appreciate your concerns around the inclusion of capital erosion or our lack thereof, I must explain that when calculating the total cost of a mortgage, we do so based on the rules set out by our regulator, the Financial Conduct Authority (FCA). They calculate the total cost of a mortgage product based on the aggregated monthly payments under each contract over the relevant period and also including any relevant fees.
As we have used the recognised formula to calculate the total cost difference between the two products as set out by our regulator, and in line with the way in which our advice is provided when considering the total cost of products, we are unable to reconsider the amount involved based on the calculation you have suggested.”
In other words, they are saying the FCA requires them to compensate only the difference in monthly payments, even though our actual loss is significantly higher.
I rejected their £2,000 offer because I want to be put back into the position I would have been in had they not made the error, not left roughly £1,000 worse off.
After rejecting the offer, they went quiet. Three weeks later I chased them, and they then forwarded an email (just the body, not the header showing when it was sent) which neither my wife nor I ever received. It simply repeated that they are sticking to the £2,000 offer because “The calculations provided are correct as per the expectations of our regulator, the Financial Conduct Authority and as such we are unable to change them.”
My options now seem to be: escalate to the Financial Ombudsman Service, use Money Claim Online, or instruct solicitors.
I’ve read that you can go to the FOS first and still pursue court action afterwards if you’re not satisfied, but that doing so can weaken a later court case, so some people suggest going straight to court instead.
I’d appreciate any thoughts or guidance on what to do next. Does the FCA genuinely expect compensation to be based on a calculation that ignores part of the loss, or are the broker trying their luck?
I appreciate this will be disappointing but I would take the £2k. If you complain to FOS, I would expect they would refer back to the FCA guidance and say what you were offered was not unreasonable. This is based on my experience of working for an Ombudsman within financial services (but not FOS).
I can’t comment with any experience on the other routes but wouldn’t expect going to FOS first would disadvantage you.
As an aside, it might well be possible to find similar cases that FOS have considered in the past, either on their website or by googling it to give you a feel for things. The Ombudsman’s office I used to work for used to published decisions (then known as Determinations).
Good luck
Rob
I can’t comment with any experience on the other routes but wouldn’t expect going to FOS first would disadvantage you.
As an aside, it might well be possible to find similar cases that FOS have considered in the past, either on their website or by googling it to give you a feel for things. The Ombudsman’s office I used to work for used to published decisions (then known as Determinations).
Good luck
Rob
If you go to the FOS there will be a considerable wait time before they even look at it.
You have been offered redress for at least the position you currently have been placed in and I would suggest that the FOS will side with them.
Arguing over a future differential in loan size I doubt will get you far given you haven’t actually sustained that loss.
Going to a solicitor will probably cost you more than that £1k.
A no win no fee solicitors might be worth a chat to just to see if they think there is any mileage.
You have been offered redress for at least the position you currently have been placed in and I would suggest that the FOS will side with them.
Arguing over a future differential in loan size I doubt will get you far given you haven’t actually sustained that loss.
Going to a solicitor will probably cost you more than that £1k.
A no win no fee solicitors might be worth a chat to just to see if they think there is any mileage.
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