Types of complaints we see
Consumers may come to us in the middle or towards the end of their mortgage term – or sometimes even after their house has been repossessed.
People complain that:
- they were advised to take an interest-only mortgage and now can’t afford to repay the capital
- their lender won’t help because it was the broker’s responsibility to advise them
- they want to switch to a capital repayment plan – but the lender won’t let them
- their mortgage term is ending and the lender won’t let them extend it
- their mortgage term is ending and they can’t sell their property and are being threatened with repossession
- they don’t want to apply for a term extension
Handling a complaint
You have the opportunity to sort things out before we get involved. If a customer complains and you don’t respond within the relevant time limits, or they disagree with your response, then they can come to us.
Find out more about how to resolve a complaint.
Things to consider
Making sure the customer had a plan in place to pay off the capital
If a consumer gets advice through a broker, we’ll usually put more responsibility on the broker for making sure the mortgage was suitable.
Following the FCA’s Mortgage Market Review, in 2014 rules were brought in that say it’s the lender – not just the broker – who’s responsible for checking the borrower’s got a plan for repaying mortgage capital. If you’re a lender, you should make sure you:
- communicate with the consumer every few years and ask how they intend to repay the capital
- encourage your customer to get in touch if there are any problems
Sometimes problems arise because the consumer’s circumstances changed after they took out the mortgage. If the mortgage was suitable at the time and the customer had a realistic plan to repay the balance, it's unlikely we’ll conclude anything was wrong at the point of sale. But you’ll still need to treat your customer fairly.
Fair treatment of customers at risk of being unable to repay
You need to show you’ve explored all options in a fair manner – taking possession should be a last resort. Your actions should have included:
- considering reasonable requests made by the consumer – for example, a term extension, conversion to a repayment mortgage, or allowing overpayments
- considering whether the consumer has other options to repay the debt, such as a new mortgage with another lender or equity release
- ensuring your customer knows they can get advice on their options, by referring them to a free independent debt organisation, or suggesting they speak with an independent financial adviser
The FCA also has guidance on how to treat interest-only mortgage customers who can’t pay, which you may find useful.
Information we will ask for when we receive a complaint
Once a complaint has been referred to us, we will ask you to provide information about your side of events.
The typical information we would normally expect to see for complaints about interest-only mortgages coming to an end includes:
- details of the change the customer has asked for rather than repaying the mortgage
- if affordability was considered, comments on whether the change is material to affordability
- details of why the customer’s request has been declined and evidence of any policies or criteria the business is relying on to reach this decision
- if the customer has advised the business of a vulnerability, comments as to how this has been taken into consideration when assessing the situation
- if the customer has asked for a term extension, comments on whether they have a reasonable plan to repay the mortgage at the end of the term
- comments on whether the customer will be able to keep up with the repayments over a longer term
- comments on whether an extension would be better for the customer financially
- details of the business’ consideration of any other options – for example, part repayment , part interest only, switching to capital repayments now
- evidence of any income and expenditure checks carried out
- mortgage offer, illustrations and term and conditions
- details of how the customer managed the mortgage so far, for example payment history, contact notes
We may ask for further information or documents, depending on the circumstances of the case.
Read more about how we handle complaints.
What we look at
If a consumer tells you that they can’t afford to pay off the capital, we’ll check you responded fairly. You should do this, even if you didn’t give advice about the mortgage.
We’ll look at whether you:
- listened to the consumer and paid attention to their circumstances
- considered proposals that were realistic and in your customer’s best interests
- offered to help – perhaps by changing the mortgage to a repayment loan or allowing the consumer more time to pay – and if you weren’t able to do so, that you’ve explained why
When someone complains about a mis-sale, we’ll ask the consumer what they remember. We’ll look at the rules in place when the mortgage was taken out – and work out whether it was suitable, and whether the consumer was given advice.
If a consumer thinks they got advice – but the paperwork suggests they didn’t – we’ll decide whether it was clear that the business was making a recommendation.
If a consumer did get advice about their mortgage, we’ll decide whether an interest-free mortgage was a suitable option at the time.
Putting things right
If we decide a broker or lender did something wrong, we’ll look at the consumer’s circumstances when working out compensation. We’ll think about what they might have done differently if the mistake hadn’t happened. They may:
- have taken out a different mortgage, or put a repayment plan in place
- not have taken out a mortgage out at all
To put things right we may ask you to:
- refund the cost of setting up and closing down the mortgage – if we think the consumer had the wrong mortgage
- put the consumer in the position they would’ve been in if they’d received proper advice
- work out a realistic repayment plan with the consumer – if the mortgage was suitable, but the consumer can’t repay the capital
- ask you to pay compensation – if you’ve caused unnecessary distress to the consumer
‘We were given the wrong advice’
‘My interest-only mortgage was unsuitable’
'We didn't understand what an interest-only mortgage involved'
'I didn't realise my mortgage was interest-only'
Customer complains - but lender says it's too late
Search our decisions database to find out about past decisions on complaints involving mortgage shortfall.
The FCA has guidance on dealing fairly with interest-only mortgage customers and a thematic review (TR18/1) examining fair treatment.