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Complaints, compensation and fines could force lenders to improve free legals – Star Letter 20/12/2019

  • 20/12/2019
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Complaints, compensation and fines could force lenders to improve free legals – Star Letter 20/12/2019
Each week Mortgage Solutions and its sister title Specialist Lending Solutions select the best contributions from readers as Star Letter.


The results of our poll which found the majority of brokers wanted lenders to better manage free legal services led to a further discussion on the article: ‘Shocking’ free legal services cost money and must change, say brokers – poll result 

Arron Bardoe got the ball rolling, as he said: “I have been banging the drum on this issue for years. The ‘free legal’ firms have no individual case ownership and callers are just directed to a pool of operators. 

“We should not be hearing the ‘high volume of business’ excuse, as they should stop taking on cases when they reach capacity. Even then, some of those firms have had the ‘high levels of calls’ answer message in place for years, which is almost as annoying.

“If brokers want this to change, they need to push lenders for cashback alternatives. We never use free legals where such is available and, if two products are similarly priced, we always use the cashback option, as there is no point in getting an offer in a week if the free legals takes two months. 

“Brokers should also remember that the lender is responsible for the service and any complaints – not the solicitor.  

“If the borrower suffers financial loss or distress, the complaint has to be directed to the lender, as the solicitor does not act for the borrower. This is key as the Financial Conduct Authority (FCA) complaints process is quite robust.

“The Legal Ombudsman is not a patch on the Financial Ombudsman Service and besides, the solicitor has no service obligation to borrowers.

“When lenders start handling and paying compensation due to delays by their own solicitors, then it might prompt them to offer cashbacks,” he added. 


Solicitors eyeing cashback

Robert Drury also weighed in, as he said: “I have recently spoken to a local firm of solicitors that I trust and in the new year will be looking at the option of the cashback deals out there as a very real alternative to the free legal debacle.  

“Yes, the cashback may not fully cover the cost of the local solicitors but knowing that a client’s remortgage will be dealt with in a professional and timely manner is worth the additional cost.” 


Poor funding means poor results 

Paul Fielding threw his two pence in saying: “The problem we have here is that lenders pay these outfits so little per case, that it’s virtually impossible to properly staff their legal operation, as well as having non-solicitors doing the work.

“As levels of business can often inflate, depending on a number of factors, getting properly trained staff in position with short notice is again, almost impossible it would seem.  

“I know from conversing with my clients about why things just don’t get done in a sensible timescale and without doubt they would happily – in most cases – accept a lender contribution to legal costs, utilising the services of either their own trusted firm or a firm that I use regularly for mortgage and equity release business.

“That way, we get a proper service and one where as advisers, we can assist in keeping control of matters, all to the client’s benefit. 

“Lenders please listen – you know that if you don’t fund things properly, you can’t effectively run your own business properly, so don’t expect conveyancing teams to do so, as the same fundamentals apply.

He added: “Oh, and by the way, please make an effort to engage with brokers more readily, so that we can offer constructive advice on how we feel we may be able to assist the process to all our benefits from our end.  

“So quit the ‘us and them’ stance toward brokers, you’ll find we will be useful to you in helping to get business completed, and not just for bringing the business in, only to see it then fall into that great black hole termed free legals.” 


Future downsides of execution-only 

The regulator’s admission that execution-only could have damaging consequences prompted a strong response to the article: FCA admits more execution-only could increase consumer harm 

Very deceptive said: “There are very few clients including the financially astute ones, who appreciate a likely future event – such as wanting to move home, wishing to restructure their finances or to repay the mortgage early – should be considered before locking themselves in to most products.  

“Given that early repayment charges are typically one, two or three years’ worth of interest, the financial shock to clients for making a quick but poor choice will affect many more customers because of execution-only.” 

“There will be a direct correlation between the increase in execution-only and the increase in customers suffering these crippling penalties. It is simple probability which will be revealed in the years ahead. 

“Some people may be forced to postpone moving home. Some will be severely restricted to just one lender at a time when they probably want to shop around to borrow much more but will instead be forced to port the existing deal to avoid a large financial loss. Others will find themselves unable to avoid incurring a massive financial hit.”

“If only our industry had a regulator to look out for mortgage applicants, especially vulnerable customers. Perhaps this should be part of the FCA’s remit?

“If the FCA was a car salesperson it would be telling you that the car with a worse safety record, like having poor brakes, is better value as it’s the cheapest.

“The rest of us realise that the journey of life has many hills to go up and down so having faulty brakes or none at all is just foolhardy. But the FCA will also offer it under execution-only to protect itself and ensure there is no legal recourse. 

“We must have the only industry where the regulator is the biggest culprit.” 


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