A speedy settlement

In November 2018, Margaret talked to her financial adviser about refinancing her mortgage, so she could move to a lower interest rate. Her financial adviser arranged an offer from a different bank, which Margaret accepted.

On the settlement day, just 2 hours before Margaret was due to sign the mortgage documents and finalise the refinancing, she received a call from her adviser. The adviser told Margaret that she would be charged a $1,000 clawback cash-back fee by her old bank if she went ahead with the refinancing.

Margaret decided to sign the documents and pay the $1,000.

 

Dispute

Margaret thought her adviser should have done more due diligence, and discovered the $1,000 fee long before the settlement day. She said that if she had been told about the $1,000 fee in advance, she would not have accepted the offer. However, due to the late notice, Margaret felt pressured into accepting the refinancing offer. The settlement day was just before the Christmas break, and Margaret knew that if she did not sign the offer in front of her, she would not be able to organise refinancing until the new year. She felt she had no choice but to pay the $1,000 fee.

The adviser sympathised with Margaret’s position, but did not think it was his fault that Margaret was not made aware of the $1,000 fee until settlement day. The adviser said he had emailed Margaret’s bank very early in the loan application process, and asked for a breakdown of the fees Margaret would be charged if she refinanced. The bank provided a fee breakdown, but did not mention the $1,000 clawback fee. The adviser thought the inconvenience Margaret had suffered was due to the bank’s error, not any mistake on his part.

Margaret complained to FSCL.

 

Review

We discussed the complaint with the adviser. We pointed out that, whether or not the adviser had not done anything wrong, it might be best to make a settlement offer, rather than investing time, effort, and money in responding to Margaret’s complaint.

 

Resolution

The adviser offered to pay Margaret $1,000, to cover the clawback fee. Margaret accepted the adviser’s offer.

 

Key insights for the participant

Even if you do not think a complaint has merit, it can be useful to take a step back, and think about whether it is sensible to dispute a complaint. Often, it will be best to consider a settlement offer, or look for another, more pragmatic resolution, to keep you and your client happy and preserve your relationship and reputation.

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