FOS hits out at lenders over underwriting ‘box-ticking’


The Financial Ombudsman Service has hit out at lenders’ “box-ticking” approach to underwriting and has urged them to stop hiding behind the Mortgage Market Review when making lending decisions.

It says that since April 2014, when the MMR came into force, it has received complaints that lenders have applied the new rules too rigidly and that this has led to “outcomes that are unfair on customers” in some cases.

In its latest newsletter, the FOS says it has received a significant number of complaints about porting, in particular. In many of these cases the borrower claims to have been told they could port their loan but now cannot as a result of tighter new lending requirements.

The FOS says: “While a business’s lending criteria isn’t something we can change, we know from cases we see that inflexible processes and ‘box-ticking’ don’t always lead to a fair outcome for the customer involved.

“So we’ve been clear that, while a business’s overall lending criteria is a matter for them, the new rules don’t mean that lenders shouldn’t consider the customers’ individual circumstances when making decisions about lending.”

The FOS has also published its first quarter complaints data for the period April to June.

Once again payment protection insurance was the most complained about product in Q1, making up 55 per cent of the 89,935 complaints received. The FOS upheld 74 per cent of these.

Current accounts were the second most complained about product and mortgages were third. There were 3,338 complaints about mortgages – 4 per cent of the total number of complaints – of which 32 per cent were upheld.

The number of complaints about mortgages fell 2.4 per cent year-on-year, however.

Between April 2013 and March 2014 there were 12,598 complaints about mortgages, of which 29 per cent were upheld. A year later this had fallen to 12,286, of which 33 per cent were upheld.