A confidential document passed to Mortgage Solutions confirms the payment details of its quality-linked reward model, which began ranking its 12 Appointed Representative distributors for the six month period from 6 January this year.
Distributors are ranked in one of three band widths within a “cost-neutral” table at high, medium or low depending on their assessment score. Scores will be reviewed on a six-monthly basis.
The Halifax reward system is 41bps for a high score, 39bps for a medium score and 37bps for a low score.
BM Solutions rewards intermediaries with higher proc fees overall at 50bps for a high score, 48bps for a medium score and 46bps for a low score.
But the system has come under fire.
One senior network figure said: “The system has been designed so that the overall cost of fees paid by LBG will not increase regardless of a consistent improvement in quality across all firms.”
If all distributors improved their quality by 30% by the end of the six months, for example, they would remain in the same position in the table and would not receive a higher fee despite making improvements, he said.
The source added: “This system hasn’t been designed to promote and encourage the continuous improvement in customer outcomes.
“Firms will strive to deliver positive outcomes under their own steam, despite of the system, not because of it.”
And a criticism was levelled at the lack of transparency over the outcomes of the arrears metric making it impossible to influence.
But a separate distributor defended the model.
He said: “It acts just like a football league. You wouldn’t expect to climb up the table if everyone else was winning matches above you.
“All distributors were given six months to improve standards ahead of their rankings in the table so there can be no excuses about where they have ended up.”
The source added that if a distributor approached LBG for further details about arrears cases then it would be likely this would be provided.
Mortgage Solutions asked LBG how its model incentivised brokers to improve quality if it remained cost-neutral and how brokers could influence the arrears meaures.
LBG declined to comment adding agreements with brokers were confidential and commercially sensitive.
But a spokeswoman for LBG said: “Linking metrics that will improve the quality of the business is clearly a good thing.
“We are committed to writing mortgage business that is good quality and to offering borrowers the right mortgage for their needs and these changes support our commitment to working closely with our key account partners and customers to achieve this.”
The document stated performance would be monitored on a rolling six month cycle though the way in which the model reviews performance will be reviewed on an ongoing basis.
LBG’s three fee-setting measurable metrics include the network’s application to completions ratio, potential fraud preventions and arrears performance.
Using these measures, separate overall scores are calculated for Halifax and BM Solutions products, so broker fees may be different for each brand.
LBG has confirmed it will continue to monitor, review and amend its quality-fee scheme on an ongoing basis.
