Speaking at the Equity Release Adviser Conference, Simon Pugh (pictured standing), FOS’ ombudsman manager, noted that there had been a slight increase in equity release complaints and a rise in such complaints being upheld but that was from a “low base”.
Figures from the FOS show that it had received 98 later life complaints in Q1 this year, up from 72 in the same period last year.
The upheld rate during the same period has gone up from 15 per cent in Q1 last year to 26 per cent in the Q1 this year.
He said that the main area of complaints was around delay, which was driven by the rising interest rate environment.
Pugh explained: “In the past, when there might have been some delay during the application process and an offer might expire and the borrower had to apply again as it was a time of low and static interest rates that wouldn’t make a huge amount of difference.
“Over the last 18 months, as interest rates have been rising, if an offer expires and the borrower has to go back to the beginning and start again, the new offer might be at a significantly higher interest rates.
“So, they’re going to end up paying more over the life of the loan, and potentially being able to borrow less as well because of the impact that might have on the loan to value so that’s been a driver of complaints, especially over the 18 months”.
He noted that any delays that had led to offers not completing had also been a driver of complaints.
Another area where complaints were increasing was around fees or changes, for example survey costs and solicitor costs.
“If somebody’s not expecting that [those fees] and they weren’t made aware that those costs might rise when they’re asked to pay them, we may get complaints about that,” Pugh added.
He added that there were also complaints about understanding as the features for later life products could be complicated, such as compound interest, restrictions on downsizing, how early repayment charges work and the possibility of long-term care.
Looking at mis-sold complaints, he said they tend to focus on the “suitability of the advice that’s given” and whether it was explained clearly.
Pugh noted that a lot of complaints a long time after the sale tend to be driven by family members, as they discover after someone has passed away or lost capacity that they have taken out an equity release or similar product and may not understand why it was needed as they weren’t included in the process.
“If the family is involved from the start and understands that in appropriate cases with the consent of the borrower, that explanation and understanding is given might help to prevent complaints arising at a later stage,” he noted.
Reducing and mitigating complaints
When asked how advisers could reduce complaints, Pugh said it was key to have a “good understanding of what your client wants, what their needs and objectives are, and how that then leads to a suitable recommendation”.
“If you do that, that’s less likely to result in complaints,” he noted.
Pugh continued that ensuring everything is “clearly documented” so when advice is given the detail is “personalised”, “clear” and the “recommendation you make is justified by the customer circumstances”.
“Having that real evidence base there really helps us to understand what happened and it helps us to understand whether or not that was suitable advice that was given,” he added.
Pugh noted that giving “tailored advice” was paramount, so brokers can show understanding of customer circumstances, current and future needs, objectives. And that needed to be done through evidence, offering clear explanation of product features and different scenarios around long-term care, downsizing, compound interest, overpayments.
He noted that managing expectations, including how long the process will take and what fees would be needed, was also important in minimising complaints.
When a complaint is made, he said that it was “really important that you listen and understand and show empathy”.
“Just because somebody is making a complaint, even if that complaint is not justified because nothing went wrong, that doesn’t mean they don’t think it is justified, that doesn’t mean they don’t think something’s gone wrong.
“So understand their point of view, listen to what they have to say, show empathy if they’re upset about what’s happened, if they’re concerned about the impact on them. Show that you’ve understood that and you’ve really thought about it, and listen to their concerns, and then investigate them carefully. Keep an open mind, go back over what was said, look at your file, look at the evidence, look at the documents from the time,” Pugh said.
He added that brokers needed to show the “thought process” of the investigation and “give explanation and reassurance” throughout the process.
If something is found to have gone wrong, brokers needed to think about customer objectives, what should have happened and “try to put the borrower back in that position”.
Consumer Duty impact ‘too early to say’
Regarding Consumer Duty, Pugh said that it was “too early to say” whether it would lead to an increase in complaints as the implementation deadline had only come into effect on 31 July.
“It takes a little bit of time because it only applies to things that happened after the 31 July deadline. First of all, something’s got to have happened. Secondly, somebody’s got to complain about it, thirdly use a firm who then have to issue a response within eight weeks and then fourthly, the consumer is going to bring the complaint to us,” he explained.
Pugh said that there was only a “relatively small number of cases” impacted by Consumer Duty so far, adding that it would be “really interesting over the next year or so to think about how that plays out and how that changes”.
He noted that when looking at an approach it would look at rules, standards and guidance that was “appropriate at the time”.
“We will look at things retrospectively, we won’t say Consumer Duty is enforced, therefore, we would expect you to have implemented in 2015, absolutely not. We will look at the advice in the light of what the requirements were in in 2015, or whatever it was,” Pugh said.