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MFAA Prosper : Mortgage and Finance Brief 05
Case TWO Case ONE The consumer's complaint A consumer alleged that a representative of a broker business did not provide him with key documents, including the finance broking contract, a list of the firm's panel of lenders and the firm's privacy and data protection policy. Further, the consumer alleged that he assumed the representative was acting as a broker, as he arranged meetings with the lender, sent a letter detailing mortgage options, provided verbal opinions and received a commission. The broker's response The broker said that the representative was not an MFAA member at that stage and had simply referred the potential borrowers to a lender. The broker did indicate that since the representative's appointment as an MFAA AMC, all such material was provided to borrowers. The Tribunal's decision Th e Tribunal decided that the MFAA member acted as a broker, not a mere referrer; and, that the member's submission was disingenuous. It concluded that the allegation about the failure to provide a finance broking contract was substantiated but dismissed the alleged failure to provide comparison rates. The Tribunal also noted that it was dealing with another complaint about this particular member from the consumer's brother and the sanctions applied took this into account. The Tribunal ordered: • The member report to the Tribunal every time MFAA membership is renewed. • The member pay $1000 for the MFAA to use in its compliance education activities. • At the outset, the member clarify the nature of the dealings, whether as broker or otherwise, with a potential borrower. Afairgo--for consumer & broker Real-life cases highlight the MFAA Disciplinary Tribunal's high standards of ethics, and the consequences of crossing the line. The consumer's complaint The consumer claimed that he was not provided appropriate finances and was locked into a seven year fixed rate loan. He indicated that he was not presented with a range of possible fixed options or the term with the cheapest rate, only discovering later that the fixed rate for three years was almost the same as for seven years. When interest rates started to fall rapidly, he discovered the large break costs if he sought to refinance. The broker's response • The representative (no longer with the member) did not adhere to the member company's and MFAA guidelines. • The loan was not processed through the lender's broker channel but through a loan partnership channel. • The normal protocols did not apply as a representative of the lender would be at hand to explain the loan facilities. • The consumer was provided with several shorter fixed rate options but he had opted for the longer term. He added that the representative of the lender had explained the terms and conditions of the seven year fixed term rate and penalties surrounding early payout to the consumer. The Tribunal's decision The Tribunal decided that the evidence does not permit it to determine that the finance arrangements were inappropriate to the complainant. The Tribunal noted: • The lender advised the complainant of the relevant issues involved in the seven year fixed rate loan and he could have sought advice. That even if the loan had been for five years, the complainant would have faced the break cost issue. • The technical problems with the process did not impact on the appropriateness of the loan. • The complainant did not raise concerns until interest rates started to go dow n. The Tribunal also obser ved that it is unclear why the consumer complained only about the broker and not the lender since the lender had been directly involved in the transaction from an early stage. 54 | Mortgage & Finance brief Legal - Tribunal
Mortgage and Finance Brief 06